INCREASED AUTHORIED CAPITAL
WHAT IS AUTHORIZED CAPITAL?
According
to Section 2 (8) of the Companies Act, 2013 “Authorized Capital” is the capital
that is authorized by the memorandum of the company to be the maximum amount of
the share capital of the company.
The company can expand its business
to the level of the authorized capital. In case the company has to expand the
business infusing more funds than at first, the company has to increase the
authorized capital by following the steps that are mentioned in this article.
AUTHORIZED SHARE CAPITAL INCREASE
A company may need to increase the
authorized share capital before it is issuing new equity shares and increasing
the paid-up capital. As authorized share capital is the total value of the
shares a company can issue. The paid-up capital is the total value of the
shares of the company that have been issued.
The Paid-up capital does not exceed
the authorized capital. Hence, if the company has authorized capital of Rs.10
lakh and paid-up capital of Rs.10 lakhs would like to induct new shareholders
then it can be done by:
v Increasing the Authorized share
capital and issuing new shares (or)
v Transferring shares from the
existing shareholders to the new shareholders.
HOW CAN THE COMPANY’S AUTHORISED SHARE CAPITAL BE INCREASED?
v Verify the company’s AOA. It is
vital to check the AOA to make sure that there is a provision in the Articles
of Association related to the expansion of the authorized share capital before
beginning the procedures for doing so. The company must first make amendments
to the AOA of the company if there is no such provision.
v Set a Board Meeting Date To enhance
the company’s authorized share capital, a Board meeting must be called and
notification given to the director. To increase the authorized share capital,
the Board of Directors must provide their consent at the meeting.
v Extra-Ordinary General Meeting On
the time, date, and location specified in the notification, hold the
extraordinary general meeting and get the shareholders’ consent to increase the
authorized share capital.
v Submit ROC forms The Corporation
must file Form SH7 within 30 days of the passing of the ordinary resolution
following its adoption at the Extraordinary General Meeting. The documents
listed below must be submitted, together with the specified government charge
for the permitted capital. a. Extraordinary General Meeting’s notice b.
Authorized
v True copy of the ordinary resolution
c. Memorandum of Association amendment (Which depicts the higher authorized
capital).
v Allotment of Shares When the authorized
share capital is raised, the company’s paid-up
share capital can also be raised by issuing more equity shares.
DOCUMENTS NEEDED FOR AUTHORISED CAPITAL
Once the board has passed the
resolution during the EGM, your company is required to inform the Registrar of
Companies (RoC) within 30 days about increasing the authorized capital.
Here is the list of documents you
have to submit to the RoC:
FORM MGT – 14
This
form is to be filed on the MCA portal, with the following details:
v Company
details, including the 21-digit Corporate Identification Number
v Purpose
of the form
v A
copy of the passed ordinary resolution
v A
copy of the resolution passed during the EGM
v Details
of the resolution
v A
copy of the updated Memorandum of Association and Articles of Association that
shows provisions for increasing the authorized capital
v Digital
signatures and DINs wherever necessary
v Notice
prepared by the EGM
FORM SH – 7
Form SH-7 is filed to inform the RoC
about the details of the increase in the authorized capital. You are supposed
to file this form on the MCA website along with attaching the following
details:
v Company
details, including the 21-digit Corporate Identification Number
v Type
of Resolution
v Meeting
date
v Service
Request Number (SRN) of Form MGT – 14
v Mention
the original authorized share capital and the new authorized share capital
approved by the board of directors
v Breakup
of the additional share capital
v Particulars
regarding the Stamp Duty fees paid
v Digital
signatures and DINs wherever necessary
v Original
certified copy of the resolution passed regarding the capital alteration
v A
copy of the updated Memorandum of Association and Articles of Association that
shows provisions for increasing the authorized capital
After filling out the forms, RoC
will process your application. If RoC finds everything fine, it will approve
the increase in authorized capital and update the master data on the MCA
website.