Overview of Increase in Authorized Capital
Each business needs more funds over time to run business. These funds can be require on a long- and short-term basis. A short-term need can be satisfie by taking loans and advances. But for the run, the company will require more funds. For a Private Limited Company, this can be done by increasing the authorized capital of the company. Since the private limited company is governe and regulated under the Company Act to make changes in the structure it is necessary to follow the Act and the rules stated.
While registering the Private Limited Company the authorized and paid-up capital is specified in the MOA of the company. The company can therefore issue new shares within the limit of the authorized capital mentioned in the MOA. If the company wishes to issue more shares than the limit that is specified then amendments need to be done in the MOA.
Eligibility criteria for Increase in Authorized Capital in India
Regarding the Increase in Authorized Capital of the Company, the following documents are need:
- Board resolution for notice of EGM of the Company
- Notice of EGM with an Explanatory Statement
- Ordinary Resolution
- Altered MOA of the Company
- Altered MOA of the Company
Documents required to obtain an Increase in Authorized Capital
Verify AOA of the Company
Before starting with the procedures for increasing the authorized share capital it is necessary to verify the AOA to ensure that there is a provision in the Articles of Association referring to the increase of the authorized share capital. If there is no such provision then the company must first make changes to the AOA of the company.
Note: Most of the AOA’s have the provision for increasing the authorized share capital of the company.
Convene a Board Meeting
It is necessary to convene a Board meeting by providing notice to Director to increase the authorized share capital of the company. At the Board meeting, it is necessary to obtain approval from the Board of Directors for increasing the authorized share capital.
After this whole procedure, a date should be fixe to conduct an Extra-ordinary General meeting to obtain the approval of the shareholders for increasing the authorized share capital and make changes to the MOA of the Company.
At last get the approval of the Board of Directors, the company secretary who is present at the meeting to present the notice of Extraordinary general meeting to the shareholders. Basing the approval, the notice of extraordinary general meeting should be present to all the shareholders, directors, and auditors of the company.
Extra-Ordinary General Meeting
Conduct the extraordinary general meeting and obtain the approval of the shareholders to increase the authorized share capital on the time, date, and place that is mentione on the notice.
The approval of the shareholders to increase the authorized capital must be in the form of an ordinary resolution.
File ROC Forms
After the ordinary resolution is passe at the Extraordinary general meeting Form SH7 should be file by the company within 30 days of passing the ordinary resolution. The prescribed government fee for the authorized capital must be paid and the documents mentioned below must be attached.
- Notice related to the Extraordinary General Meeting
- Authorized True copy of the ordinary resolution
- The changed Memorandum of Association (Which depicts the higher authorized capital)
If the procedure mentioned in the Companies Act and the Companies Rules are follow to increase the authorized capital of the company then the registrar would approve the filing and increase the authorized share capital of the company. The new authorized share capital will be reflect on the MCA portal.
Allotment of Shares
Once the authorized share capital is increas the paid-up share capital of the company can be increas by issuing the fresh equity shares.
FAQs About Increase in Authorized Capital?
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