Increase Authorised Share Capital

Over time, each company's financial needs increase. Both short-term and long-term needs for these finances may exist. By taking out loans and advances, a temporary need can be met. The business will need more money for the run, though. Increasing the company's authorized capital is one way to accomplish this for a Private Limited Company. Since the Private Limited Company is governed and regulated by the Company Act, it is vital to abide by the Act and the established rules while making modifications to the structure.

The Private Limited firm's MOA specifies the approved and paid-up capital when the firm is registered. Therefore, within the parameters of the permitted capital specified in the MOA, the firm may issue new shares. The MOA needs to be amended if the firm desires to issue more shares than the set maximum.

What is authorized capital?

The capital that is specified in the company's memorandum as being the maximum amount of the share capital of the company is referred to as "Authorized Capital" in accordance with Section 2(8) of the Companies Act of 2013.

The firm can grow up to the allowed capital level for the corporation. The company must increase the authorized capital by taking the actions described in this article if it needs to expand its business by investing more money than it did at initially.

Authorized Share Capital increase

A company could need to raise the authorized share capital prior to issuing more equity shares and raising paid-up capital. The total amount of shares a corporation is permitted to issue is known as authorized share capital. The paid-up capital is equal to the aggregate market value of the corporation's issued shares.

The permitted capital is not greater than the paid-up capital. Consequently, if a firm wants to add new shareholders and has authorized capital of Rs. 10 lakh and paid-up capital of Rs.:

1. Adding to the authorized share capital and issuing additional shares, or
2. Transferring shares from current shareholders to new investors.

The permitted capital increases often occur after the new shares are issued. Connect with our consultants at sales@indiafiilngs.com in order to help raise the authorized share capital.

How to increase the authorized share capital of the company?

Verify AOA of the Company

It is vital to check the AOA to make sure that there is a clause referring to the increase of the authorized share capital in the Articles of Association before beginning the procedures for expanding the authorized share capital. If such a clause is absent, the company must first modify the AOA of the company.

Most AOAs have provisions for expanding the company's authorized share capital..

Convene a Board Meeting

A Board meeting must be convened and the director must be notified in order to increase the company's authorized share capital. To increase the authorized share capital, the Board of Directors must provide their consent at the meeting.

After completing the procedure, a date should be chosen for an EGM to be convened in order to obtain shareholder approval for increasing the authorized share capital and amending the Company's Memorandum of Association.

Obtain the Board of Directors' blessing before presenting the notice of the extraordinary general meeting to the shareholders through the company secretary who is present at the meeting. Upon receiving approval, the notice of the extraordinary general meeting should be distributed to the company's directors, auditors, and all shareholders.

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.

An ordinary resolution must be passed by the shareholders in order for the permitted capital to be increased.

File ROC Forms

After the ordinary resolution has been approved at the Extraordinary General Meeting, the corporation has 30 days to file Form SH7. The documents listed below must be submitted, together with the specified government charge for the permitted capital.

1. Notice related to the Extraordinary General Meeting
2. Authorized True copy of the ordinary resolution
3. The revised Memorandum of Association (which reflects the greater allowed capital)

If the steps outlined in the Companies Act and the Companies Rules are taken to increase the authorized capital of the business, the registrar will approve the filing and raise the company's authorized share capital. Amount of newly authorized shares will be shown on the MCA portal.

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.