Change in Authorized Capital
When a company is in the incorporation stage, one of the most important decisions that the promoters must make is how much capital to invest in the company.
As the business grows, the company may consider expanding its operations, whether in size, scale, or structure. To make that dream a reality, more funds may need to be pumped into the company, essentially increasing the company’s share capital. The amount of capital required may occasionally exceed the authorised capital limit at the time. The maximum amount of capital for which the company can issue shares to shareholders is the authorised capital.
The authorised capital limit is specified in the memorandum of association under the capital clause, as per Section 2(8) of the Companies Act, 2013.
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Our Process
Change Authorised Capital of Company
When a company is in the incorporation stage, one of the most important decisions that the promoters must make is how much capital to invest in the company.
As the business grows, the company may consider expanding its operations, whether in size, scale, or structure. To make that dream a reality, more funds may need to be pumped into the company, essentially increasing the company’s share capital. The amount of capital required may occasionally exceed the authorised capital limit at the time. The maximum amount of capital for which the company can issue shares to shareholders is the authorised capital.
The authorised capital limit is specified in the memorandum of association under the capital clause, as per Section 2(8) of the Companies Act, 2013. A company may take the necessary steps to raise the authorised capital limit in order to issue more shares, but it may never issue shares that exceed the authorised capital limit.
- Ordinary Resolution for Increase in Authorized Capital, Certified True Copy
- MOA Modification
- AOA modification, if any
- Consent with less notice if the meeting was called with less notice.
- Any other documents that may be relevant
- Check to see if the company’s AOA has approved an increase in authorised capital. A Special Resolution must be passed to change the AOA if it is not permitted.
- Hold a board meeting to determine the day, date, time, and location of the extraordinary general meeting, as well as to increase the authorised capital of the company. Notify each member or shareholder, director, and auditor of the meeting’s day, date, time, location, and agenda.
- Convene, hold, and conduct the EGM at the specified time and location, and pass a resolution seeking shareholder approval. Submit the required form within the timeframe, if applicable.
- To increase the permitted share capital, amend the company’s Memorandum of Association.
- If the shareholders’ resolution is approved, you must file Form SH-7 with the Registrar of Companies within 30 days. Furthermore, if the resolution is passed as a special resolution, Form MGT-14 must be filed within 30 days of its passage.
Reasons for Increasing a Company’s Authorized Capital
What could be the reasons for the increase in the company’s authorised share capital? A company may need to increase its authorised capital for a variety of reasons. Here are a few examples:
- The requirement for massive funds.
- Financing new projects for the company
- Merger of two businesses and cash infusion as part of an agreement strategy
- Additional share capital is being issued.
- Debt is turned into equity capital.
- To meet legal requirement