How to increase the Authorised Share Capital in a Company?

How to Increase the Authorised Share Capital in a Company?

How to Increase the Authorised Share Capital in a Company?

Authorised share capital is the maximum amount of capital a company can have. How to Increase the Authorised Share Capital in a Company? A company's subscribed and issued share capital can never be greater than its authorised share capital which is mentioned in the Capital clause of the Memorandum of Association (MOA) of a company. Increasing authorised share capital means changing the capital clause, which ultimately means changing MOA.

The procedure for increasing authorised share capital is governed by provisions mentioned under Section 61 of Companies Act, 2013 which is read with Sections 64 and 13. As per Section 61 of the Act, Authorised share capital of a company can only be increased if the Articles of Association (AOA) of a company allow it. The procedure is as follows:

Pass Board Resolution and Ordinary Resolution

If the AOA permits modification of MOA, call a board meeting and get consent from directors. A board resolution must be passed in favor of alteration of authorized share capital. Once that is authorised a special notice should be sent to all the shareholders, directors and auditor of the company inform them about the Extra-Ordinary General Meeting (EGM) and the agenda to increase the authorised share capital of the company. The next step is to pass an ordinary resolution is favor of increase of authorised share capital. 

Alteration of share capital does not require special resolution to be passed in the EGM, even though it is special business. An ordinary resolution suffices.

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File form with ROC

Once resolution is passed, file form SH-7 within the next 30 days to inform the Registrar of Companies (ROC) about the change. The form should be accompanied with notice of EGM, true copy of the ordinary resolution and altered MOA along with prescribed fees.

Notice to ROC

A notice too should be filed with the ROC as per the format prescribed under Section 64 of the Act. It should be done within 30 days of alteration of share capital.

Alteration in authorised share capital is rarely done as it is already kept quite high from the beginning. Companies Act, 2013 requires entities to strictly follow rules prescribed in the Act.

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