Increase Authorized Capital:

Increase Authorized Capital:

Each business needs more funds over time to run business. These funds can be required on a long- and short-term basis. A short-term need can be satisfied 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 governed 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.

Description: According to Section 2 (8) of the Companies Act, 2013 “Authorized Capital” is the capital that is authorized by the memorandum of the company to be the maximum amount of the share capital of the company.

The company can expand its business to the level of the authorized capital. In case the company has to expand the business infusing more funds than at first, the company has to increase the authorized capital by following the steps that are mentioned in this article.

Important Points on Increase of Authorized Capital:

• This involves amendment of MOA
• AOA may also need to be amended
• Check ROC Fee om MCA Portal
• Board Meeting and EGM Required

Process to Increase Authorized Capital of the Company

Step:1: Obtain Board of Directors Approval for Increase of Capital of Company: To decide on the new limit of the authorized capital, or say alteration of the capital clause of the MOA directors must meet in a legally convened board meeting. The notice sent to directors must contain the agenda of the meeting, and we suggest to include the proposed resolution so that the directors come prepared. We strongly recommend following the standards prescribed by ICSI in SS-1 for board meetings.

Step:2: Convene an Extraordinary General Meeting (EGM) of Shareholders: The next logical step is to seek approval of the shareholders of the company. The decision of shareholders can be taken only in a valid extraordinary general meeting. To convene an EGM, the directors must send notice to every shareholder of the company at least 21 clear days before the date of EGM. The notice of EGM must contain the agenda, draft of the proposed resolution to be passed as a special resolution.

Step:3: Filing of Special Resolution to Roc in Form -MGT-14: The special resolution means a decision taken by more than 75% voting rights. The special resolution once adopted in the EGM is then filed before the ROC for their approval. The certified copy of the resolution is filed in Form -MGT-14 with the prescribed fee within 30 days of the passing of the resolution. The altered MOA and the copy of the minutes of the meeting of EGM where the special resolution is passed need to be attached to the form.

Step:4: Filing of application for Increase in Authorized Capital in SH-7: Once the approval of the shareholders is obtained with the passing of the special resolution in the EGM, the authorized director shall file an application in Form SH-7 with the concerned ROC with attachments like the copy of altered MOA & AOA, Special Resolution etc. With the approval of the SH-7, the authorized capital of the company stands increased.