Increase Authorised Share Capital
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Increase Authorised Share Capital - Procedure
While incorporating a company, the promoters need to decide upon the authorised share capital of the company. Generally, the authorised share capital is decided based on the requirements of the company at the time of incorporation. However, as the company grows, the fund requirements of the company grow thus necessitating the issue of more shares. However, how can more shares be issued by a company if it has already issued all the shares? Let’s see!
What is Authorised Capital? As per Section 2(8) of the Companies Act, 2013, “authorised capital or nominal capital means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.”
Simply put, the authorised capital of the company is the maximum amount of share capital for which the company can issue the shares. The Memorandum of Association contains the authorised share capital under the capital clause.
Checklist for increasing the Authorised Share Capital
Following is the checklist for increasing the authorised share capital:
- Check the Articles of Association (AOA)
- Alter the AOA (if required)
- Conduct a Board Meeting
- Conduct an Extraordinary General Meeting (EGM)
- Pass an Ordinary Resolution
- Intimate the registrar regarding the increase in the authorised share capital
Following documents shall be required for altering the authorised share capital of the company:
- Digital Signature Certificate of the authorised director of the company
- Director Identification Number (DIN)
- Memorandum of Association
- Articles of Association
- PAN Card of the company
- Certificate of Incorporation
- Notice of the EGM along with an explanatory statement
- Resolution passed in the EGM
Following is the procedure to increase the authorised share capital of the company:
Check the Articles of Association: The Articles of Association must contain a clause to authorize the company to increase its authorised share capital. If such a clause is absent, then articles shall be amended by passing a special resolution in the general meeting to insert this clause. It is only after the authorization of the articles that the company can increase its authorised share capital.
Holding a Board Meeting: A board meeting shall be held to call an Extraordinary General Meeting (EGM). Notice shall be sent to all the directors of the company to their registered addresses at least 7 days before the meeting. In the board meeting, the board must resolve to call an EGM to present the resolution for the alteration of the authorised share capital.
Holding the Extraordinary General Meeting: A notice for the EGM shall be sent to the shareholders of the company, including the date, time, place, and agenda of the meeting. The notice must also state the method of voting in the EGM to be adopted for passing the resolution. The notice shall be given not less than 21 days prior to the conduct of the meeting. A shorter notice can be served on fulfillment of requisite conditions. In the meeting, an ordinary resolution shall be passed to increase the authorised share capital of the company.
Filings with the Registrar of the Company
After passing the resolution, the company shall file the following forms with the registrar of the company along with the payment of prescribed fees:
eForm MGT-14: This form must be filed within 30 days of passing the resolution on the MCA portal containing the following details:
- Details of the company along with its CIN
- The purpose for which the form is filed
- Date of dispatch of the notice
- Date of passing the resolution
- Details of the resolution
- Digital Signatures and DINs wherever required
- The following attachments shall be uploaded while filing the form:
- Notice of the EGM
- Explanatory Statement annexed to the notice of the meeting under Section 102
- Certified copy of the resolution in the Extraordinary General Meeting
- Copy of the altered Memorandum of Association
- Copy of the altered Articles of Association (if required)
eForm SH-7: This form shall also be filed within 30 days of passing the resolution in the EGM to intimate the registrar regarding the increase in the authorised share capital containing the following details:
- Details of the company along with its CIN
- Type of resolution passed
- Date of the meeting
- MGT-14 Service Request Number
- Details with respect to the amount of the original authorised capital and the amended authorised capital of the company
- The breakup of the additional authorised capital of the company
- Particulars of the Stamp Duty paid
- DSCs and DINs wherever required
- The following attachments shall be uploaded while filing the form:
- Certified copy of the resolution passed in the EGM for alteration of the authorised capital
- Copy of the altered Memorandum of Association
- Copy of the altered Articles of Association (if the same were altered)
- Other optional attachments, if any
FAQs
The company needs to alter Clause-V of the Memorandum for increasing the authorised share capital.
The articles of association can be altered by passing a special resolution in the general meeting of the company.
The authorised share capital is the share capital for which the company is authorised to issue shares. Paid-up share capital refers to shares that have been issued, and payments have been made by the shareholders of the company.
No, the authorised share capital can only be increased by passing an ordinary resolution in the general meeting of the shareholders. Directors alone cannot increase the authorised share capital.
No, it is not mandatory to immediately issue the shares forming part of the authorised share capital. The company can keep the capital unissued until it needs to use it.
