Income Tax efiling in India for FY 2023-24 (AY 2024-25)
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File ITR Now Hire eCA NowIncreasing Authorised Share Capital
What is authorised capital?
According to Section 2 (8) of the Companies Act, 2013, the authorised capital of a company is the maximum amount of share capital that the company is approved by its constitutional documents and laws to issue (allocate) to its shareholders (sometimes this is referred to as the authorized share capital, registered capital or nominal capital). However, the remaining portion of the authorized capital can remain unissued. The authorized capital can be changed with the shareholder's approval. The authorized capital issued to shareholders is referred to as the issued capital of the company.
Procedures to increase the authorized share capital
The first step is to verify the AOA (article of the association) of the company to check whether there is any provision available to increase the authorized capital or not. In case there is no such provision found in the (AoA) article of the association, the company must first make changes to it. However, most of the AOAs have the provision to increase the authorized share capital of the company. The second step is to arrange a board meeting. It is very important to convene a board meeting by providing notice to the director to increase the authorized share capital of the company. Getting approval from the Board of Directors for increasing the authorized share capital is a must for a company. After following these steps, there must be Extra-ordinary General meeting should be fixed to obtain the approval of the shareholders for increasing the authorized share capital and modified changes to the MOA of the Company. Later, a date should be fixed to conduct an Extra-ordinary General meeting to obtain the approval of the shareholders for increasing the authorized share capital and make changes to the MOA of the Company. Convene an extraordinary general meeting and get approved shareholders to increase the authorized share capital at the specified time and place mentioned on the notice. The approval of the shareholders should be in the form of an ordinary resolution to increase the authorized capital. The purpose of convening an Extra-ordinary General meeting (EGM) is to obtain the assent of the shareholders. The approval of the shareholders must be in the form of an ordinary resolution authorising increasing of authorised share capital. The notice of a general meeting is to be furnished at least 21 days prior to the meeting along with an Explanatory Statement according to Section 102 of the Companies Act. In order to amend the Articles of Association (AoA) the company must file the form MGT-14 within 30 days after passing the Special Resolution at the General Meeting. File ROC Forms - When the ordinary resolution is passed at the extraordinary general meeting, you will be required to fill out the form SH-7 within 30 days of passing the ordinary resolution. However, the company is also required to pay the government fee for authorized capital and the documents mentioned below must be attached. Notice pertaining to the extraordinary general meeting Authorized copy of the ordinary resolution The changed (MoA) Memorandum of Association After all the procedures, the registrar will approve the filing and increase the authorized capital of the company only when s/he finds that all the prescribed procedures and rules are followed carefully as mentioned in the company's act. Finally, here comes the last step of Allotment of Shares - The new authorized share capital is shown on the MCA portal. Once the authorized share capital is increased, then the paid-up share capital of the company can also be increased by issuing fresh equity shares.
When a company should go for Raising the Authorised Capital of a Company
There could be many reasons for a company to increase authorised capital. Some of the major reasons are expressed below– The company may be in need of immense funds Debt is converted to equity capital To start new projects For fulfilling the legal requirements Additional share capital issuance
Relevant Documents For Share Capital
Following are the important documents that you need to furnish in order to increase the authorised capital. A copy of a Digital signature certificate (DSC) from any authorised director of the company A copy of the modified or latest version of the AoA A copy of the company’s PAN card A copy of the revised/rectified or latest version of the memorandum of association (MoA) A copy of the company’s incorporation certificate Note- The documents must be filed with the MCA within 30 days after getting consent from the shareholders for the share capital increase.
Frequently asked questions
What is the minimum authorized shared capital?
What is the time limit for filing Form SH-7?
What are the prerequisites for an Increase in authorised capital?
Is it a must to conduct a board meeting to increase the authorized share capital?
Why is it required to increase the Company's Authorised Capital?
Krishna Gopal Varshney
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