How to increase the authorized capital of a company?

Authorized capital is basically an amount of initial capital with which the company is registered with the Registrar of Companies (RoC) and is also the maximum capital amount which the company can secure through the issue of shares to its shareholders and not beyond this amount.

Step 1: Vetting of MOA and AOA 

A company must check it’s both the MOA and AOA about the limit of authorized capital. If the issue of shares or stocks is going to be beyond the specified limit in MOA, then it has to increase its authorized capital. Before increasing the company must check whether it can do so legally as per the norms of association of the company. Altering AOA is one of such option to amend such provisions.

Alteration of AOA:

To alter the AOA, the company must take approval from the entire shareholder in an annual general meeting or extraordinary general meeting. Such altered AOA must be filed with MCA within 30 days from the date of resolution.

Once the AOA is altered, it can proceed with a further procedure to increase authorized capital.

Step 2: Holding Board Meeting 

A board meeting must be arranged to take the approval of the board to increase the authorized share capital. Moreover, to decide the date and time to call on EGM or AGM to take the shareholder’s approval. Notice for holding an EGM or AGM must be sent to all the shareholders as per the rules and regulations. A director must be fully authorized to file all the necessary forms with the MCA.

Step 3: Hold Shareholders Meeting 

The company shall hold the EGM/AGM on the specified date and time to take the approval for an increase in authorized capital. An ordinary resolution must be passed in the meeting.

Step 4: Intimation to the ROC 

After taking approval in shareholders meetings, a company shall draft the altered MOA to increase authorized share capital. A company has even need to intimate about the same by filing form SH-7 with the MCA. The form must be filed in 30 days from the date of resolution. The documents which are required to file the said form are as under.

  • A true certified copy of Board resolution for alteration in AOA
  • A true certified copy of Board resolution for alteration in MOA
  • Notice of AGM/EGM
  • A true certified copy of Shareholders resolution
  • Altered copy of AOA
  • Altered copy of MOA

After receiving approval from the MCA, a company shall alter its every copy of the AOA and MOA. It is necessary to incorporate changes in the MOA and AOA and put it up on the website if any.

How To Issue New Shares To Increase Authorised Share Capital?

To Existing Promoters: To increase the authorized capital and to issue new shares to existing promoters, the following steps are required. A board meeting is called for all shareholders, and Form PAS-3 is filled with the Registrar of Companies to intimate the allotment of new shares.

To New Shareholders: To issue new shares to new shareholders, a valuation report is required from a certified chartered accountant.

ATTACHMENT NO. 1

CERTIFIED TRUE COPY OF THE EXPLANATORY STATEMENT FOR ITEM NO. 1

TO INCREASE THE AUTHORISED CAPITAL

The Company is having an existing authorized share capital of Rs. 1, 00,000/- consisting of 10,000 equity Shares of Rs. 10/- each. Since the company would require more funds for expanding its business and meeting its current expenditure it was necessary to raise the authorized share capital of the company from Rs. 1,00,000 /-  to Rs. 3,00,000/- keeping in view the company’s future requirement of Funds.

None of the Directors are in any way concerned or interested in the said resolution except to the extent of their shareholdings in the Company.

TO AMEND THE MEMORANDUM OF ASSOCIATION

In order to reflect the increase authorised share capital of the Company, and in order to conform to the requirements of the Companies Act, 2013, Clause V of the Memorandum of Association of the Company must be amended.

A draft of the amended Memorandum of Association with the following Clause V was tabled for discussion:

“V. The Authorized Share Capital of the Company is Rs. 3,00,000/- (Rupees Three Lakhs only) divided into 30,000 (Thirty Thousand only) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”

As Per section 13 of Companies Act, 2013, the alteration of the memorandum of association of the Company requires the approval of shareholders. The Board now seeks the approval of shareholders for the same.

None of the Directors are in any way concerned or interested in the said resolution except to the extent of their shareholdings in the Company.

Your Directors hence seek your consent for amending the provisions contained in the Memorandum of Association in the General Meeting by passing of the said resolution as an Ordinary Resolution.

 BY ORDER OF THE BOARD

 Date   : day/month/year

Place :  Alfapur

DIN xxxxxx

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