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The maximum number of shares that a private business may issue is defined by its authorised share capital. According to the 2013 New Companies Act, there is no minimum capital increase requirement. The capital clause of the Memorandum of Association is updated by the board approving an ordinary resolution in order to issue additional shares or increase the authorized share capital.
This sum of authorised share capital increase varies from business to business and could alter, but only with the consent of shareholders. Let’s say a firm has an authorised capital of ₹2 lakhs; in that case, it follows that it can issue shares for up to ₹2 lakhs. However, because it is flexible, this allowed capital may be increased or decreased as needed. Let’s imagine a firm has ₹1 lakh in allowed capital, but an investor wishes to put in ₹1 crore. In this case, the company can raise its authorised capital to ₹1 crore. The permitted share capital increase for company registration is covered here.
At HSRAdvisory, we offer various packages to increase your authorised capital
Increase of capital : ₹5499/+tax
Issue of new shares : ₹7999/+tax
Note: Govt fees and stamp duty depends on the authorised capital of the company
Here are the few guidelines one must know about authorised share capital:
It could invite investments as the same can be easily accommodated if there is enough authorised capital.
The documents must be filed with the MCA within 30 days after obtaining consent from the shareholders for the share capital increase. The standard resolution for private firms is merely SH-7, and MGT-14 is not required.
In the case of a private limited company, the procedure for increasing the authorised share capital is According to Section 61 of the Companies Act of 2013, a limited company with a share capital may change the capital clause in its Memorandum of Association (MoA) by making an ordinary resolution in a general meeting, provided that its Articles of Association (AoA) grant the firm permission to do so. Within 30 days, a notice of alteration must be submitted in Form No. SH-7 to the ROC. Only when specifically permitted by its articles of association and following member approval by a regular resolution passed at an extraordinary general meeting of the business is a corporation permitted to expand its authorised share capital.
Check the Articles of Association:
Convene a Board Meeting:
Call for an Extraordinary General Meeting (EGM):
Pass a Special Resolution:
File the Resolution with the Registrar of Companies:
Issue New Shares:
Below are the steps on procedure for increase in authorised share capital
Verify whether the company’s AOA has given the go-ahead to increase the authorised capital. If AOA is not permitted, a Special Resolution must be passed in order to change AOA
Hold a board meeting to establish the day, date, time, and location of the extraordinary general meeting as well as to enhance the company’s authorised capital. Give notice of the meeting’s day, date, time, location, and agenda to each member/shareholder, director, and auditor of the company
Convene, hold, and conduct the EGM at the time and location stated, and adopt a resolution to seek shareholder approval. If applicable, submit the required form within the timeframe
Change the company’s Memorandum of Association to increase the permitted share capital
If the shareholders’ resolution is approved, you have 30 days to file form SH-7 with the Registrar of Companies. Additionally, if the resolution is passed as a Special Resolution, form MGT-14 must be filed within 30 days after the resolution’s passage.
What can be the reasons for increase in authorised share capital of the company? There could be various reasons for a company needing to increase the authorised capital. Let us see a few:
As per the Companies Act, 2013, an increase in authorised share capital requires a special resolution passed by the shareholders of the company. A special resolution is a resolution that is passed by at least 3/4th majority of the shareholders present and voting at a general meeting of the company.
However, the AOA of the company may prescribe a higher majority or additional requirements for passing a special resolution. Hence, it is important to review the company’s AOA before passing a resolution to increase authorised share capital.
The rules for increasing authorised share capital of a company are as follows:
Check the Articles of Association (AOA):
Conduct a Board Meeting:
Pass a Special Resolution:
Obtain Approval from ROC:
Issue New Shares:
The maximum number of shares that a corporation is permitted to issue to its shareholders is known as the authorised share capital. The MOA contains a reference to the authorised share capital, which is decided upon when the company is incorporated.
The authorised share capital can be determined based on various factors such as the company’s future growth plans, capital requirements, and financial projections. The company’s promoters and directors decide the authorised share capital based on their estimation of the company’s future capital needs.
Subsequently the authorised share capital may be raised by passing a special resolution and submitting the required paperwork to the ROC. The corporation can now issue more shares to its shareholders in order to raise more money thanks to the increase in authorised share capital.
Answered by our experts
The authorised capital for a private limited company can vary and is decided by the company during its incorporation.
A Pvt Ltd company can increase share capital by passing a resolution in the board of directors meeting and obtaining approval from shareholders.
Yes, a private company can alter its share capital by passing a resolution in the board of directors meeting and obtaining approval from shareholders.
To change the authorised capital of a company, the company needs to pass a resolution in the board of directors meeting and file the necessary documents with the Registrar of Companies (ROC)
If a private company has more than 50 shareholders, it is required to convert to a public company.
Yes, authorised shares can be increased by passing a resolution in the board of directors meeting and obtaining approval from shareholders.