To Increase Authorised capital of the company
Introduction
Authorised capital means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company. The company can expand its business to the level of the authorized capital. In case the company has to expand the business increase more funds than at first, the company has to increase the authorized capital
- a company alters its share capital in any manner specified in sub-section (1) of section 61
- an order made by the Government under sub-section (4) read with sub-section (6) of section 62 has the effect of increasing authorised capital of a company
Steps to Increase Authorized Capital:
Here’s a breakdown of the key steps involved:
-
Review Your Articles of Association (AoA): Check if your AoA includes provisions for increasing authorized capital. This is a crucial first step.
-
Board Meeting and Resolution: Convene a board meeting to discuss the proposed increase. Following the discussion, a board resolution needs to be passed, formally proposing the capital increase.
-
Extraordinary General Meeting (EGM): Hold an EGM to obtain shareholder approval. Shareholders will receive a notice in advance, detailing the EGM’s date, time, venue, and the agenda (including the proposal for increasing authorized capital).
-
Shareholder Resolution: During the EGM, shareholders will vote on the proposal. An ordinary resolution needs to be passed by the shareholders to formally approve the increase.
-
Filing Electronic Forms: Within 30 days of passing the resolution at the EGM, two electronic forms must be filed with the Registrar of Companies (ROC):
- eForm MGT-14: This form provides details about the alteration of your company’s capital clause.
- eForm SH-7: This form specifically notifies the ROC about the increase in authorized capital.
Important Considerations
- The specific requirements and procedures may vary depending on your company’s jurisdiction.
- Consulting a legal professional is highly recommended to ensure compliance with all relevant regulations.
- Increasing authorized capital doesn’t automatically translate to acquiring funds. You’ll still need to issue and sell new shares to investors to raise the actual capital.
By following these steps and adhering to legal requirements, you can effectively increase your authorized capital and unlock your business’s full potential for growth.
