Increase Authorised Share Capital

Increase Authorised

The authorised share capital is the maximum amount of capital a company is legally allowed to issue to shareholders. Increasing authorised share capital allows a company to raise additional funds by issuing more shares. This process requires approval from the company’s board of directors, shareholders, and compliance with the Companies Act, 2013. It is typically done when a company seeks to expand operations, attract more investors, or meet financial needs. The increase helps the company to strengthen its financial base and accommodate future growth opportunities.

Looking to expand your company’s share capital? Accotale experts will handle all the compliance and documentation to streamline the process.

Package includes alteration of AOA, MOA, drafting of resolutions, & filing of forms with ROC.

Guidelines for Increasing Authorised Share Capital

Board Approval

Resolution Required: Obtain approval from the company’s board of directors through a board resolution. The resolution should outline the proposed increase and the reasons for it.

Amendment of Memorandum of Association (MoA)

File with MCA: Amend the company’s Memorandum of Association to reflect the new authorised share capital. This requires passing a special resolution at a general meeting of shareholders.

Special Resolution

General Meeting: Convene an Extraordinary General Meeting (EGM) to pass a special resolution for the increase in authorised share capital. Ensure the resolution is passed with the required majority.

Filing with Registrar of Companies (ROC)

Forms to be Submitted: File the necessary forms with the Registrar of Companies (ROC), including Form MGT-14 for the special resolution and Form SH-7 for the increase in share capital.

Payment of Fees

Stamp Duty and Fees: Pay any applicable stamp duty and registration fees associated with the increase in authorised share capital.

Update Corporate Records

Registers and Records: Update the company’s statutory registers, including the Register of Members and Register of Share Capital, to reflect the new authorised share capital.

Compliance with Regulatory Requirements

Legal and Regulatory Compliance: Ensure compliance with all legal and regulatory requirements as specified by the Companies Act, 2013 and other relevant regulations.

Communication with Shareholders

Inform Shareholders: Notify shareholders about the increase in authorised share capital and any implications for their shares or rights.

Benefits of Increasing Authorised Share Capital

Enhanced Financial Flexibility
Access to Funds: Increasing authorised capital allows a company to issue additional shares, providing access to more funds for expansion, new projects, or operational needs.

Improved Creditworthiness
Strengthened Balance Sheet: A higher authorised share capital enhances the company’s financial stability, potentially improving its credit rating and making it easier to secure loans or attract investors.

Attracting New Investors
Investment Opportunities: By increasing the authorised capital, the company can offer more shares to new investors, potentially broadening its investor base and raising capital more effectively.

Facilitating Expansion
Growth and Development: The additional capital can be used to finance growth initiatives such as acquisitions, new product development, or entering new markets, supporting long-term strategic goals.

Documents Required for Increase in Authorised Share Capital

Board Resolution:
- A certified copy of the board resolution approving the proposal to increase the authorised share capital.
Special Resolution:
- A copy of the special resolution passed at the General Meeting or Extraordinary General Meeting (EGM) authorizing the increase in authorised share capital.
Amended Memorandum of Association (MoA):
- A revised copy of the Memorandum of Association reflecting the new authorised share capital.
Form MGT-14:
- Filed with the Registrar of Companies (ROC) to submit the special resolution passed by the company.
Form SH-7:
- Filed with the ROC to update the details of the authorised share capital.
Copy of Notice of General Meeting:
- The notice convening the General Meeting or EGM where the resolution for increasing share capital was discussed and approved.
Minutes of the Meeting:
- Minutes of the General Meeting or EGM where the increase in authorised share capital was approved.
Proof of Payment:
- Receipt of payment for any applicable stamp duty and filing fees related to the increase in authorised share capital.
Shareholder’s Approval:
- Documentation or evidence of the shareholders’ approval, if required by the company’s Articles of Association or the Companies Act.

Checklist for Increasing Authorised Share Capital

Board Resolution
Draft and approve a board resolution for the increase in authorised share capital.

Special Resolution
Convene a General Meeting or Extraordinary General Meeting (EGM) and pass a special resolution for the increase.
Prepare and file the special resolution with Form MGT-14.

Amend Memorandum of Association (MoA)
Complete and file Form SH-7 with the ROC to update the authorised share capital.
Submit Form MGT-14 with the ROC for the special resolution.

Payment of Fees
Pay applicable stamp duty and filing fees associated with the increase in authorised share capital.
Obtain and keep receipts for payment.

Update Corporate Records
Amend the Register of Members and Register of Share Capital to reflect the new authorised capital.
Ensure all statutory registers are updated accordingly.

Shareholders’ Communication
Notify shareholders about the increase in authorised share capital and any changes to their rights or shareholding.

Types of Capital in a Company

Authorised Share Capital

Definition:- The maximum amount of capital that a company is legally allowed to raise through the issuance of shares. It is specified in the company's Memorandum of Association (MoA) and can be increased as needed.

Issued Share Capital

Definition:- The portion of authorised share capital that has been issued to shareholders. It represents the actual amount of capital that the company has raised from its shareholders.

Paid-up Share Capital

Definition:- The amount of issued share capital that has been fully paid by the shareholders. It reflects the actual investment made by shareholders in exchange for shares.

Called-up Share Capital

Definition:- The portion of issued share capital that the company has called upon shareholders to pay. It includes amounts that are currently due and payable.

Reserve Capital

Definition:- A portion of the company’s issued share capital that is reserved and cannot be called up until the company is being wound up. It provides additional security for creditors.

Working Capital

Definition:- The capital used in the day-to-day operations of the company. It is calculated as current assets minus current liabilities and reflects the company's ability to cover short-term obligations.

Fixed Capital

Definition:- Capital invested in fixed assets such as property, plant, and equipment. It is used for long-term investment and growth.

Loan Capital

Definition:- Funds raised through borrowing, such as loans or bonds. It is repayable over time and usually comes with interest payments.

How to Increase Authorised Shares

Board Approval:

Obtain approval from the company’s board of directors through a board resolution. This step involves proposing the increase in authorised shares and discussing its rationale.

Draft Special Resolution:

Prepare a special resolution to increase the authorised share capital. This resolution must be passed by the shareholders during a General Meeting or Extraordinary General Meeting (EGM).

Conduct General Meeting:

Convene a General Meeting or EGM where shareholders vote on the special resolution. Ensure the resolution is passed by the required majority.

Amend Memorandum of Association (MoA):

Update the company’s Memorandum of Association to reflect the new authorised share capital. This amendment must include the revised maximum number of shares the company is allowed to issue.

File with Registrar of Companies (ROC):

Submit the revised MoA and the special resolution to the Registrar of Companies (ROC) using Form MGT-14. Also, file Form SH-7 to update the authorised share capital in the company’s records.

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