Increase in Authorized Capital
The Authorized Capital of a company reveals the value and number of shares which the company can issue to its shareholders. At the time of incorporation, the total paid-up share capital mentioned in the MOA of a company serves as the initial paid-up capital or the initial authorized capital of the company. The increase in authorized capital of a limited company might be required for anyone or more of the following objectives:
- Issuing new shares
- Inducting more capital into the company
- Sharing further its risks and liabilities with new investors/shareholders
- To grow or diversify into the desired new areas of business
- And, other objectives
The desired increment in the authorized share capital can be made anytime by the concerned company with proper approval of the existing shareholders, passing the requisite Board resolution, and filing certain Forms with the concerned ROC along with the prescribed additional fees. The entire procedure for increase in authorized capital of a company is briefly described separately in the section below.
Procedure for Increase in Authorized Capital of a Company
In general, the procedure for making increment in the authorized capital of a company involves the following relevant tasks or processes:
- Making the necessary alterations in the MOA and AOA of the company, to facilitate increment in the existing authorized capital of the company in accordance with the provisions given in the sections 13 and 14 of the Companies Act of 2013; in case, there were no provisions for such purposes in the same.
- The section 61 of the Companies Act of 2013 gives power to a limited company to alter its share capital; while the section 64 prescribes the company regarding sending relevant notice to the concerned ROC related with the alteration of its share capital.
- Calling for a Board Meeting for passing the required resolution to make increment in the present authorized capital of the company, as per the section 173 of the Companies Act, 2013.
- Lastly, filing the Form SH-7 and Form MGT-14, together will all required documents and enclosures with the ROC concerned, within Thirty days from passing the requisite resolution for increment in the authorized capital.