What is Increase in Authorized Capital?
Authorized Capital is the amount of capital with which company is registered with Registrar of Companies. It is the maximum amount of capital up to which a company can raise fund through the issue of share. Companies generally are registered with small authorized capital and increase it eventually as per need.
Authorized capital can be increased, only if it is authorized by Article of Association and after passing an ordinary resolution in the meeting of members. (If increase is not authorized by AOA, appropriate steps to alter the Article and include the clause is taken)
Need to increase Authorized Capital of Company
Authorized capital is the upper limit up to which a company a can raise fund from public. In order to raise fund from public, you need to increase the authorized share capital of your company.
Documents Required for increasing Authorized Share Capital
For increasing Authorized Share Capital:
- Memorandum of Association of the company.
- Article of Association of company
- List of members/shareholders of company
- Authorized capital proposed to be increased.
Procedure to increase Authorized Capital of a Company
Check whether AOA of the company authorizes it to increase the Authorized Capital or not. If AOA is not authorized you need to amend AOA by passing Special Resolution.
Hold a board meeting and pass a resolution to increase the authorized capital of the company and decide day, date, time and place for Extra-Ordinary General Meeting. Issue notice to every member/shareholder, director, auditor of the company specifying day, date, time, place and agenda of the meeting.
Convene, hold and conduct EGM on the date place and time specified, and pass a resolution to take approval from shareholders. File specified form if any, within a specified period.
Alter Memorandum of Association of the company to increase the authorized share capital of the company.
File form SH-7 with Registrar of Companies within 30 days of passing shareholders’ resolution. Also, file form MGT-14 within 30 days of the passing of the resolution, if the resolution is passed as Special Resolution.
Frequently Asked Questions
Authorized capital is defined as the maximum limit of the share of a company that can be shared with the shareholders of the company.
Authorized Capital is defined as the amount of capital with which a company is registered with the Registrar of Companies. It is termed as the maximum amount of capital up to which any company can raise funds through the issuance of share.
Authorized capital is defined as the threshold limit up to which a company can raise funds from the public. Thus, in order to raise funds from public at large, you need to increase the authorized share capital of your company.
In order to increase the Authorise Capital of a company a clause regarding increase in authorized capital must be specified in Articles of Association along with the prior approval from the Shareholders of the Company.
Yes it is deemed important that a company should determine its Articles of Association along with the Memorandum in the context of authorized capital.
No, a company cannot make such decision themselves. A Company before, taking any such decisions must notify the relevant board members along with the shareholders and get their approval.
As soon as the Company gets its approval from the Board members and the shareholders of the company, a Company needs to draft the revised MOA in order to proceed further.
A company must fill FORM SH-7 in order to notify ROC for the change made.
The Company must file Form SH-7 within 30 days from the date of resolution.
Documents such as a copy of Board resolution for alteration in AOA, copy of Board resolution for alteration in MOA, any notification issued regarding AGM or EGM, copy of Shareholders resolution, copy of an Altered AOA along with the copy of Altered MOA are required to fill Form SH-7.
Clause 4 of the Articles of Association has to be altered. In case if the Company is not authorized to amend the AOA then it has to be amended by passing a special resolution. On every AOA a copy of the order approving such alteration has to be filed with Registrar within the period of 15 days.
Clause V of the Memorandum of Association has to be altered. A notice must be given to the registrar within a period of 30 days for any such alteration to be made in Memorandum of a company.
Form MGT-14 must be filled after passing of Resolution to the concerned ROC along with the agreements made.
One must attach documents such as copy of Resolution along with explanatory statement and Altered Memorandum as well as an altered Article of Association.
