Company Authorized Capital Increase
Authorised capital of a company determines the amount of shares a company can issue. To issue additional shares or raise funds, authorised capital must be increased.
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Authorized Capital Increase – MCA Filing
Increasing a company’s authorized share capital enables it to issue more shares or raise funds. The process requires board and shareholder approval, followed by filing with the MCA to maintain compliance under the Companies Act, 2013.
Increase Authorized Capital Online
Increase your company’s authorized capital online with MCA approval. We handle board resolutions, shareholder approvals, and necessary filings to ensure compliance with the Companies Act, 2013.
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Authorised Share Capital Increase
Authorised share capital increase refers to raising the maximum amount of share capital that a company is legally permitted to issue to its shareholders. This is typically achieved through an amendment to the company's Memorandum of Association (MOA)
By increasing the authorised share capital, a company expands its capacity to issue additional shares, enabling it to raise funds from existing or new shareholders. This process is often undertaken to support business expansion, finance new projects, or meet evolving financial needs.
Amending the MOA for Increasing Authorized Capital
During the formation of a Private Limited Company, the initial authorised and paid-up capital levels are established in the company's Memorandum of Association (MOA). This sets the maximum amount of share capital that the company is allowed to issue to its shareholders. Should the company aim to exceed this predetermined cap by issuing additional shares, it necessitates an amendment to the MOA to raise the authorised capital threshold, thereby accommodating the issuance of new shares beyond the original limit.
Reasons for Increasing Authorized Share Capital
As mentioned above, a company might consider increasing its authorised capital for several reasons, including:
Addressing significant financial needs Funding new business initiatives Facilitating mergers or acquisitions and infusing capital as part of a restructuring plan Issuing additional shares Converting debt into equity Meeting regulatory requirements, if applicable
Documents Required for Authorized Share Capital Increase
Specific documentation must be submitted within 30 days following shareholder approval to formalise an increase in authorised share capital. For private companies, this involves submitting the resolution through e-form SH-7, while the submission of e-form MGT-14 is not required. Ensure the following documents are prepared for filing:
The latest amended version of the Memorandum of Association (MoA) The most recent or revised copy of the Articles of Association (AoA), particularly in cases where the AoA has been altered A copy of the ordinary resolution approved by the company's shareholders
Procedure to Increase Authorized Share Capital
The process involves several essential steps to ensure compliance with regulatory requirements and secure shareholder approval for the proposed increase.
Convening a Board Meeting for Authorized Capital Increase
Notice for Board Meeting: Dispatch a notice detailing the meeting's agenda to all directors at least 7 days in advance to their registered addresses. Board Resolution: During the board meeting, a resolution will be passed to convene an extraordinary general meeting (EGM). This involves issuing a notice in line with Section 101 of the Companies Act to present and seek approval for the revised authorized capital clause in the Memorandum of Association via an Ordinary Resolution, as per the guidelines of Section 60 of the Act. Shareholder Notification: Inform shareholders about the EGM specifics, including the agenda, date, time, and venue. The notice should also outline the voting method for resolution approval. Distribution of EGM Notice: Ensure the EGM notice reaches the following parties:
Directors Shareholders Auditors
EGM Notice Period: The notice for the EGM should be issued at least 21 days before the scheduled date. However, a shorter notice period is permissible if at least 95% of voting-eligible members consent, which can be obtained either in writing or via electronic means.
Documents Required
A certified true copy of the capital alteration resolution. Updated MoA with the Capital Clause changes. Updated AoA if it includes a new provision for capital increase. Any other optional documents, if required.
Payment of E-Stamp Duty
Complete the e-stamp duty payment for the augmented Authorized Share Capital amount via the Ministry of Corporate Affairs (MCA) Portal, as law requires.
Procedure Following Authorized Share Capital Increase
After the authorised share capital increase, certain steps need to be followed to ensure regulatory compliance and effective implementation of the decision.
Penalties for Non-Compliance with Authorized Capital Increase Procedures
While the Companies Act 2013, specifically in Sections 61 and 65, outlines the provisions for increasing authorised capital, it doesn't directly specify penalties within these sections. However, Section 450 of the Act addresses penalties for general non-compliance.
When a company or its officers fail to adhere to the prescribed rules, a penalty of Rs. 10,000 is imposed. An additional daily penalty of Rs. 1,000 is levied for ongoing violations until the issue is resolved. Specifically concerning the late submission of Form SH-7, which is required within 30 days of the resolution to increase authorised capital, the penalty accrues at Rs. 1,000 per day of delay. This penalty continues until the default is corrected, subject to a maximum cap of Rs. 25 lakh, whichever amount is lower.
Why Choose bkauditors.com for Authorized Capital Increase
bkauditors.com is your ideal partner for increasing your company's authorised capital, offering a comprehensive suite of services tailored to your needs. Here's why:
Expert MOA Amendment Guidance: We specialize in navigating the complexities of amending your Memorandum of Association (MOA), ensuring that your documentation accurately reflects your new capital structure. MGT-14 Filing Assistance: Our team efficiently handles the filing of Form MGT-14, which is required for registering changes in your company's capital with the Registrar of Companies. Seamless Form SH-7 Submission: We take care of filing Form SH-7, which is essential for officially recording the increase in your authorized capital. End-to-End Support: From the initial assessment to the final submission, bkauditors.com provides unwavering support, ensuring a smooth and compliant capital increase process.
Choosing bkauditors.com means opting for a stress-free experience backed by expertise and a commitment to your business's growth.
Frequently Asked Questions
Common queries regarding registration, compliance, documents, and procedures.
According to Section 2 (8) of the Companies Act 2013, “Authorized Capital” is the capital authorised by the company's memorandum to be the maximum amount of the share capital of the company. The company can expand its business to the level of the authorised capital. If the company has to expand the business, infusing more funds than at first, the company has to increase the authorised capital.
Common questions about Increase Authorised Capital. What is Authorized Capital?Authorized capital, as per Section 2 (8) of the Companies Act 2013, represents the maximum amount of share capital a company can issue as stated in its memorandum.What is the difference between Authorized and Paid-Up Capital?Authorized capital is the maximum potential value of shares a company can issue, while paid-up capital is the actual value of shares that have been issued and paid for.How can a company increase its authorized share capital?A company can increase its authorized share capital by amending its Memorandum of Association (MOA) to raise the maximum limit and then following the prescribed legal procedures.Why would a company consider increasing its authorized capital?Reasons may include addressing financial needs, funding new initiatives, facilitating mergers, issuing additional shares, or meeting regulatory requirements.What documents are required for increasing authorized capital?Required documents typically include the amended MOA, resolution passed by shareholders, and filings such as Form MGT-14 and Form SH-7, along with other relevant company records.What is the procedure to increase authorized share capital?The process involves steps such as reviewing the Articles of Association, convening board and shareholder meetings, obtaining approvals, filing necessary forms, and updating documents.What happens if the Articles of Association do not permit changes?In such cases, the AoA must be amended to include provisions for altering authorized capital in accordance with the Companies Act, 2013.How is the Extraordinary General Meeting (EGM) conducted?The EGM is convened to seek shareholder approval for the proposed increase in authorized capital through a resolution passed by voting.What is Form MGT-14, and why is it required?Form MGT-14 is a filing required to register changes in the company's capital structure with the Registrar of Companies (RoC), ensuring compliance with regulatory requirements.What is the purpose of filing Form SH-7?Form SH-7 is filed to officially notify the RoC about the augmentation of authorized share capital, providing details of the increase and relevant documents as per regulatory guidelines.How is the penalty calculated for non-compliance?The penalty for non-compliance with authorized capital increase procedures is Rs. 10,000 for the company and its officers, with additional daily penalties until rectification, subject to a maximum cap.What assistance does bkauditors.com offer for authorized capital increase?bkauditors.com provides expert guidance on MOA amendment, assistance with MGT-14 filing, seamless Form SH-7 submission, and end-to-end support throughout the process.How does bkauditors.com ensure compliance during the process?bkauditors.com ensures compliance by meticulously handling all necessary documentation, filings, and procedures as per legal requirements, minimizing the risk of penalties or non-compliance.Can bkauditors.com assist with other corporate compliance matters?Yes, bkauditors.com offers a range of services covering various corporate compliance needs, including incorporation, tax filings, accounting, and annual compliance requirements.How long does it take to complete the authorized capital increase process?The timeline may vary depending on factors such as the complexity of the amendment, approvals required, and processing times with regulatory authorities, but bkauditors.com aims to expedite the process efficiently.Is there ongoing support available after the process is completed?Yes, bkauditors.com provides ongoing support and assistance even after the authorized capital increase process is completed, ensuring continued compliance and addressing any queries or concerns.How can I get started with bkauditors.com for authorized capital increase?You can get started by contacting bkauditors.com to discuss your requirements and initiate the process, where their experts will guide you through each step to ensure a smooth and successful outcome.Does bkauditors.com offer customized solutions based on specific needs?Yes, bkauditors.com understands that each business may have unique requirements and can tailor their services accordingly to meet your specific needs and objectives effectively.What are the benefits of choosing bkauditors.com for this process?Choosing bkauditors.com ensures a stress-free and compliant experience backed by expertise, efficiency, and a commitment to facilitating your company's growth and success.Can bkauditors.com provide references or case studies of past clients?Yes, bkauditors.com can provide references or case studies of past clients who have successfully completed the authorized capital increase process with their assistance.