Increased Authorised Capital

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A company may increase its authorised share capital before issuing new equity shares and increasing paid-up capital. The share capital is that important part of the company’s equity which is raised by issuing shares and selling them to stockholders in exchange for capital.

What is Authorised share capital?

Authorised share capital is referred to as the total value of shares a company can issue.

What is paid-up capital?

Paid-up capital refers to the total value of shares the company has issued. Paid-up capital can never exceed authorised capital.

Sometimes it may happen that a company needs to increase authorized capital in order to issue new shares for more capital. It is mandatory to mention the provisions of increase authorised capital in AOA before applying for increasing authorized capital by passing a special resolution. Once the resolution is passed in the meeting, Form SH-7 must be filed by the company within 30 days of the passing of ordinary resolution. The necessary documents to be filed along with Form SH-7 are as follows:

a. Notice related to EGM

b. Authorized true copy of ordinary resolution

c. Changed Memorandum of Association and Articles of Association

According to the Companies Act and Companies Rules if the procedures for increasing authorised capital are followed then the Registrar would approve the filing and increase the authorised share capital of the company.

Process to Increase Authorised Capital

  • First step is to verify that AOA has the provision for increase authorised capital.
  • Call for board meeting to decide time, date, place and agenda of the Extraordinary General Meeting (EGM). Notification for the same is given to all members.
  • The Ordinary resolution to increase authorised capital is passed in the EGM by the approval of the members of the EGM. Then the change is to be made in MOA and AOA.
  • The form is filed with ROC within 30 days from the EGM to increase authorised capital along with required documents as mentioned above.
  • When ROC checks and verifies all the documents, then approval to increase authorized capital will be granted.

Required Documents

Acceptable DocumentDocument TypeAdditional Details
Notice related to EGM
Changed Memorandum of Association and Articles of Association
Authorized true copy of ordinary resolution
Form SH-7

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You Ask, We Answer

This Form MGT-14 is required to be filed only when case of special resolution passed for the alteration of the AOA.
Yes it is necessary to have pre-condition in AOA for increasing the authorised capital and if there is no provision for that then alteration must be done before increasing the authorised capital.
The extraordinary meeting of the members of the board takes place where the members of the company shall have right to vote or not to vote in favour of the increase in the authorised share capital of the company. The consent of the member is accorded regarding the alteration in the memorandum of association of the company.
As per Section 2(84) of the Companies Act, 2013 ‘share’ means share in the share capital of the company including stock. It represents the interest of the shareholder in the company, measured for the purpose of liability and dividend, by the sum of money.

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