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Puja Mohan & Associates
Company Secretaries
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Increase in Authorised Capital Companies

Before issuing additional equity shares and increasing its paid-up capital, a company may need to raise its authorized share capital. Authorized share capital is the maximum value of shares a company is allowed to issue, while paid-up capital is the actual amount that shareholders have paid for the issued shares. The authorized share capital cannot exceed the paid-up capital.

For instance, if a company has Rs. 20 lakh in authorized capital and Rs. 20 lakh in paid-up capital, and it wants to bring in more shareholders, it can do so by:

  1. Transferring shares from existing shareholders to new shareholders.
  2. Increasing the authorized share capital to allow the issue of new shares.
  3. A combination of both options.
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    PROCEDURE:

    1. Board Meeting:
    • Convene a Board Meeting to approve the proposal for increasing the authorized capital and to prepare a draft resolution for the Extraordinary General Meeting (EGM).
    1. Shareholder Approval:
    • Hold an EGM to obtain approval from the shareholders through a resolution. The resolution should specify the amount of the increase and the alteration in the Memorandum of Association (MOA).
    1. Alteration of MOA:
    • Amend the capital clause in the MOA to reflect the increased authorized capital.
    1. Filing with RoC:
    • Form MGT-14: File with the Registrar of Companies (RoC) within 30 days of passing the special resolution to notify about the change in MOA.
    • Form SH-7: File within 30 days after the EGM, updating RoC about the increased authorized capital and amended MOA.
    1. Pay Fees:
    • Pay the prescribed filing fees based on the increase in authorized capital.

    This process ensures that the company’s records are updated, and the authorized capital is legally increased.