Increased Authorized Capital

The company’s authorised capital is the limit to which it may raise its equity capital. We help companies increase their authorised capital by applying to the ROC in form SH-7.

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Process to Increase Authorized Capital

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Filing of Special Resolution to Roc in Form -MGT-14

Filing of application for Increase in Authorised Capital in SH-7

What is Authorized Capital?

Authorised share capital is the maximum amount of shares a company can issue to its shareholders. It is defined in the company’s Articles of Association and sets the limit of the company’s borrowing capacity. The authorised share capital can be increased or decreased by passing a special resolution in a general meeting. If your business is looking to expand or attract investors, increasing authorized share capital may be necessary. By doing so, you increase the number of shares available to be issued to shareholders, which can help raise capital for the company. Authorized capital is not the same as issued capital, which is the amount of capital that a company has actually issued to its shareholders. The issued capital cannot exceed the authorized capital.

Procedure to Increased Authorized Capital?

STEP 1 – Obtain Board of Directors Approval for Increase of Capital of Company
The board should pass a resolution to approve the increase and authorize the directors to take all necessary steps to give effect to the resolution.
STEP 2 – Convene an Extraordinary General Meeting (EGM) of Shareholders
After obtaining the board’s approval, the company should call an EGM to obtain the approval of the shareholders.
STEP 3 – Filing of Special Resolution to Roc in Form -MGT-14
Within 30 days of passing the special resolution, the company must file Form MGT-14 with the Registrar of Companies (ROC)
STEP 4 – Filing of application for Increase in Authorised Capital in SH-7
Once the approval of the shareholders is obtained with the passing of the special resolution in the EGM, the authorised director shall file an application in Form SH-7 with the concerned ROC with attachments like the copy of altered MOA & AOA, Special Resolution etc

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Documents Required

  • Certificate of Incorporation
  • Special Resolution passed by Shareholders
  • Altered MOA & AOA
  • PAN & Aadhar of Authorized Signatory

Authorized Capital Benefits

Attract investors:Expanding the authorized share capital enables the issuance of additional shares to investors, facilitating the procurement of capital for the company. This strategy amplifies the company’s capacity to attract investment, providing a vital avenue for raising funds. 

Fund expansion:When it comes to scaling up your business operations, amplifying authorized share capital stands as a strategic move to acquire the requisite funds. This increase in capital not only fortifies your financial position but also furnishes the necessary resources for expansion endeavors.

Flexibility:Augmenting authorized share capital provides your business with invaluable flexibility in issuing shares as necessary, alleviating the need for incessant shareholder approval. This strategic move streamlines processes, empowering swift decision-making and agility in responding to market demands or unforeseen opportunities.

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Frequently Asked Questions

Can authorised share capital be decreased?

Yes, authorised share capital can be decreased if authorised by its Article of association, by passing an ordinary resolution in a general meeting of shareholders.

What is the difference between authorised share capital and issued share capital?

Authorised capital refers to the maximum amount of share capital that a company is authorised to issue to its shareholders, as stated in its Articles of Association. Paid-up capital, on the other hand, refers to the amount of capital that has actually been issued and paid for by the shareholders.

 
Is MGT 14 required for increase in authorised capital?

Yes, as per the Companies Act, 2013, filing of MGT 14 is required for increase in authorised capital.

 
How long does the process take to increase authorized share capital in India?

The process typically takes around 2-3 weeks.

Are there any restrictions on the use of the increased share capital?

No, there are no restrictions on the use of the increased share capital.