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.