Increasing Authorised Share Capital

Starting a business can be easy but keeping it up, in the long run, is not. The essential thing to run a business for a long requires funds. All business needs more funds over time to keep it for so long. The need for the fund of a business can be short-term and long-term based. The company can accumulate the fund easily for the short term by availing of loans and advances. But in the long run, the company will demand more funds. This can be done by increasing the company's authorised capital in the case of a private limited company. Since the private limited company is governed and regulated under the Company Act, it is necessary to follow the Act and the rules stated to make changes in the structure.

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1. 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.

2. 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.

3. 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

4. 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?


The minimum authorized share capital of Rs.1 lakh and Rs.5 lakh is required for public limited companies and Private Limited Companies.


What is the time limit for filing Form SH-7?


The Form SH-7 must be filed within 30 days from the date of resolution.


What are the prerequisites for an Increase in authorised capital?


A clause respective to an increase in authorized capital must be specified in the Articles of Association (AoA) along with the prior approval with the consent of all shareholders of the Company.


Is it a must to conduct a board meeting to increase the authorized share capital?


Yes. Convene s board meeting is a must for increasing the authorized share capital of the company.


Why is it required to increase the Company's Authorised Capital?


In case a company wants to increase the raise of money from the public, then it will be essential to first increase its authorised capital.

CEO Krishna Gopal

Krishna Gopal Varshney co-founder & CEO of Myitronline is amongst the top emerging startups of Asia and authorized ERI by the Income Tax Department. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. ”

Krishna Gopal Varshney
Co-founder & CEO