Increase in the Authorized Share Capital

In a general context an authorized Share Capital means the maximum amount of share capital which a Company can allocate to its shareholders during its life as authorized by its constitutional documents. It can be altered with the permission of the Members of the Company.

In Legal sense as defined under the Section2(8) of the Companies Act, 2013 The Authorized Share Capital of the Company or “nominal capital” means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.

For Increasing the Authorized Share Capital is covered under Section 61,64 read with Rule 15 of Companies (Share Capital and Debenture) Rules, 2014 which says:-

SECTION 61

• A limited company having a share capital may, if so authorized by its articles, alter its memorandum in its general meeting to—
  • increase its authorised share capital by such amount as it thinks expedient;
  • consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares:
    Provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner;
  • convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;
  • sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;
  • cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.
• The cancellation of shares under sub-section (1) shall not be deemed to be a reduction of share capital.

Procedure for Increase of Share Capital

• • Checking the Authorization in Articles of Association, If the Articles of Association of the Company does not contain the provision then Articles are required to be altered.
  • Holding of a Board Meeting for passing necessary Board Resolution for increasing the Authorized Share Capital and for altering the Memorandum of Association subject to the approval of shareholders in accordance with Section 101 and 102 of the Companies Act, 2013.
  • Altering the Capital Clause of Memorandum of Association 
  • Filing of E-form MGT-14 and E-Form SH-7 with the ROC along with following attachments within 30 days of shareholders approval:-
    • Certified true Copy of Ordinary Resolution passed at Extra Ordinary General Meeting;
    • Copy of altered Memorandum of Association;
    • Copy of altered Articles of Association 
    • Shorter Notice Consent if any
    • Any other document as available.

Thereafter, making ROC payment and Stamp Duty online.