Increase in Authorised Share Capital
Increase in Authorised Capital: What is Authorised Capital, Documents, Process, Fees, and Time Taken
Authorised capital is specified in the Memorandum of Association (MOA) of a company and represents the maximum amount of share capital that the company is permitted to issue. In contrast, issued capital refers to the portion of authorised capital that has actually been issued to shareholders.
Authorised capital is defined under Section 2(8) of the Companies Act, 2013. A company may issue shares beyond its existing authorised capital only after increasing the authorised share capital by amending the MOA.
To increase the authorised capital, the company must alter its charter documents and obtain the required regulatory approvals in accordance with applicable laws.
Need for Increase in Authorised Share Capital
There are several reasons that may necessitate an increase in a company’s authorised share capital, including the following:
Expansion of Operations:
Companies often expand their business activities, which requires substantial funding. Issuing additional shares is one of the safest ways to raise capital, thereby necessitating an increase in authorised share capital.To Avoid Financial Constraints:
In situations where the company faces liquidity issues, increasing authorised capital allows it to raise funds and improve cash flow, helping to prevent financial strain.Regulatory Requirements:
Certain regulatory provisions may mandate an increase in authorised capital. To ensure compliance and avoid penalties, companies must complete the prescribed procedures to enhance their authorised capital.Mergers and Amalgamations:
With mergers and amalgamations becoming increasingly common, companies often increase their authorised capital to finance acquisitions or corporate restructuring.Further Public Offer (FPO):
When a company has fully utilised its existing authorised capital, it must increase the limit to issue additional shares through a further public offer.
Documents Required for Increase in Authorised Capital
An increase in authorised capital is finalized only after submitting the required forms with the necessary attachments. Within 30 days of obtaining shareholder approval for the increase, the company must file Form SH-7 with the following documents:
Copy of the original and amended Memorandum of Association (MOA)
Copy of the original and amended Articles of Association (AOA)
Copy of the shareholders’ resolution approving the increase
Process for Increase in Authorised Share Capital
Steps for Increasing Authorised Capital
Companies must follow these steps to increase their authorised share capital:
1. Review the Articles of Association (AOA)
Check the AOA: Verify whether the Articles of Association contain a provision for increasing the authorised share capital.
Amend the AOA (if required): If the provision is absent, the company must first amend the AOA to include the authority to increase the share capital.
2. Convene a Board Meeting
Pass a Board Resolution: Hold a board meeting to obtain the board’s approval for the proposed increase in authorised capital.
Schedule an Extraordinary General Meeting (EGM): The board sets the date, time, and venue for the EGM where shareholder approval will be sought.
3. Obtain Shareholder Approval
Conduct the EGM: Hold the extraordinary general meeting as scheduled and pass an ordinary resolution to approve the increase in authorised share capital.
4. File Necessary Forms with the Registrar of Companies (ROC)
a) Form MGT-14
Must be filed within 30 days of passing the shareholder resolution.
Documents and details required:
Company information, including CIN and registered office
Purpose of filing the form
Date of passing the resolution
DSCs and DINs of concerned persons
Notice of the EGM
Certified copy of the resolution passed at the EGM
Copy of the amended MOA and AOA
b) Form SH-7
Must be filed within 30 days of passing the resolution in the general meeting to officially authorise the increase in authorised capital.
Documents and details required:
Company information
Type of resolution
Date of the meeting
SRN of Form MGT-14 already filed
Original and increased authorised share capital
DSCs and DINs of the concerned persons
Payment of applicable stamp duty
Fee for Increase in Authorised Capital
Fees for Increasing Authorised Capital
The fee for increasing authorised capital depends on the proposed amount. The fee structure is as follows:
| S.No | Nominal Share Capital | Fee Per Document (₹) |
|---|---|---|
| 1 | Less than ₹1,00,000 | 200 |
| 2 | ₹1,00,000 – ₹4,99,999 | 300 |
| 3 | ₹5,00,000 – ₹24,99,999 | 400 |
| 4 | ₹25,00,000 – less than ₹1 crore | 500 |
| 5 | More than ₹1 crore | 600 |
Additional Charges:
An additional stamp duty of 0.15% of the increased authorised capital is also payable.
Professional Services
BizCatalyst Technologies can assist in making the entire process of increasing authorised capital seamless. Our professional fee is:
| S.No | Service | Amount (₹) |
|---|---|---|
| 1 | Professional Fee | 7,999 |
Time Taken For Registration to Increase in Authorised Capital
The company must pass an ordinary resolution at a duly convened Extraordinary General Meeting (EGM) to approve the proposed increase in authorised share capital. After passing the resolution, the company is required to file Form SH-7 with the Registrar of Companies (ROC) within 30 days from the date of the resolution.
The process of registering the increased authorised share capital typically takes 4 to 5 working days.
Penalty for Non-Compliance
Penalty for Non-Compliance with Authorised Capital Regulations
Under Sections 61 and 65 of the Companies Act, 2013, a company that violates the rules for increasing authorised capital is subject to penalties. In case of non-compliance:
The company and every officer in default shall be liable to a penalty of ₹10,000.
If the company fails to file Form SH-7, it shall be liable to a fine of ₹1,000 per day, which may extend up to a maximum of ₹25,00,000.
