Increase Authorized Capital

Increase Authorized Capital

In the realm of business, it's critical to increase investment in order to expand and grow a company significantly. The secret to corporate growth is investment. A company can raise money by raising the amount of authorised shares it owns.

It may be feasible to raise the authorised capital by adding extra funding to the company or by issuing new shares. The Authorised Capital limit is stated in the Memorandum of Association under the Capital Clause, in accordance with Section 2(8) of the Companies Act, 2013. 

In order to issue more shares, a business may follow the appropriate procedures as outlined by Lawgical Adda to raise the authorised capital limit; nevertheless, it is not permitted to issue shares above the allowed capital limit under any circumstances.

Authorised Share Capital: What Is It?

Authorised share capital is the maximum number of shares that a business may issue to shareholders in compliance with its bylaws. It is plausible that a portion of the capital remains unsold. A change in the authorised capital requires the approval of the shareholders.

The attributes of authorised capital are as follows:

• The allowed capital is decided upon at the formation and incorporation of a firm.
• The rate at which the ROC fees increase will depend on the amount of approved capital.
• A business's authorised capital must be specified in its MOA and AOA.
• The authorised share capital, or the maximum amount of capital that a business can maintain, serves as the foundation for the nominal value of each share.
• Once the corporation is formed, it can be altered at any point.
• The Company's nett worth cannot be ascertained using the authorised capital.
• A firm may choose to issue shares with a lower value rather than ones equivalent to its authorised capital.

Records Needed for an Increase in Permitted Share Capital

The required paperwork needs to be submitted within 30 days following the shareholders' approval of the company's increase in authorised share capital. It is required of private enterprises to register the resolution in e-form SH-7; in this instance, e-form MGT-14 filing is not required. The following records need to be available when submitting the electronic form:

1. A copy of the Memorandum of Association's most recent or modified version
2. A copy of the AoA in its most recent version, if any, in the event that it changes
3. A copy of the shareholders adopted a standard resolution for the corporation.

How to Modify the Approved Capital?

Read the Association's Articles of Association.

The set of guidelines governing the company's internal operations is found in the Articles of Association. Therefore, it is necessary to confirm if the Articles of Association contain a clause permitting a change in the company's permitted capital before taking any further action regarding the increase or decrease in such capital.

The procedure is made simpler if the provision is present. If the clause is absent, the company cannot proceed with changing the authorised capital until the Articles of Association have been modified in accordance with Section 14 of the Companies Act, 2013 ("Act").

A board meeting is scheduled.

The directors will receive notice of the meeting's agenda at least seven days before it is scheduled to meet at each of their registered addresses.

Pass a Board Resolution at the meeting to convene an Extraordinary General Meeting and give notice in accordance with Section 101 of the Act. At that meeting, an Ordinary Resolution containing the modified section on authorised capital in the Memorandum of Association may be presented for approval. The provisions outlined in Section 60 of the Act shall be adhered to by the proposed change.

The shareholders will receive notification about the specifics of the meeting, such as the agenda, time, date, and location.

The voting procedure to be used to pass the motion at the Extraordinary General Meeting must be specified in the notice.

All of the following parties are to receive notice of the Extraordinary General Meeting:- 

• Directors
• Investors 
• Auditors

The notification of the EGM must be sent out at least 21 days before the scheduled date of the meeting. A shorter notice period, however, may only be granted with the approval of at least 95% of the members who are able to cast ballots during the meeting. The consent must be acquired in one of two ways:

• Writing
• Digital mode

The Extraordinary General Meeting is Held

The issue of the increase in share capital is brought up after the meeting has begun. After that, voting is conducted in accordance with a set procedure to reach a decision on the issue. Following approval and resolution passing, the increase in Authorised Capital is made and an accompanying explanatory statement is submitted.

Submitting a filing to the Registrar of Companies

A firm must file eForm SH-7 and eForm MGT-14 (if applicable) with the Registrar within 30 days of the resolution being passed, together with the required fees.

1. Form MGT-14: Within 30 days after the relevant resolution being passed, this form must be submitted to the RoC. The following information must be submitted with the form on the MCA portal:

• Information about the business, including the CIN.
• purpose for which the application is being submitted.
• Date on which the notice was sent.
• Date on which the resolution was passed.
• information on the resolution.
• DINs and digital signatures when needed.

The ensuing attachments must be sent:

• Notification of the EGM and the Explanatory Statement in accordance with Section 102.
• certified copy of the EGM resolution that was adopted.
• A copy of the updated MOA, with the Capital Clause amended.
• A copy of the updated AOA, which includes the clause increasing the amount of allowed capital.

2. SH-7 Form: Within 30 days after the relevant resolution being passed, this form must be submitted to the RoC. This form's purpose is to notify the Registrar of the specifics of the permitted capital increase. The following information should be submitted using the form on the MCA portal:

• Information about the business, including the CIN.
• Resolution type.
• The meeting date.
•  Form MGT-14: Service Request Number (SRN) must be submitted.
• Information on the total quantity of newly authorised shares as well as the original authorised share capital.
• information about how the new share capital was divided up.
• information about the paid stamp duty fees.
• DINs and digital signatures when needed.

Any more attachments that are optional. The forms must be turned in by the deadline in order to prevent fines or other consequences that could hold the company and its personnel accountable.

The business can grow to the extent of the money that has been approved for it. The company must proceed to enhance its authorised capital by adhering to Lawgical Adda's guidelines if it plans to inject more cash above its initial limit.

Get in touch with us to streamline your procedure. After you have a discussion about the requirement, we will assign a professional account manager to help you with the entire process by understanding your company needs and offering solutions.