Increase In Authorised Share Capital Of The Company

Authorised share capital represents the maximum value of shares a company can issue, as outlined in its Memorandum of Association (MoA). Companies may need to increase this limit to accommodate growth, attract investments, or issue additional shares. This process is regulated by the Companies Act, 2013, ensuring compliance through structured approvals and filings.

Section 61 of the Companies Act, 2013, empowers a limited company to alter its share capital if authorized by its Articles of Association (AoA). This includes increasing the authorised share capital via an ordinary resolution in a general meeting. Additionally, Section 13 governs alterations to the MoA, while Section 14 applies to AoA amendments if required. The procedure must adhere to these provisions to avoid regulatory penalties.

Process

To increase authorised share capital, companies must follow a systematic approach involving internal approvals and regulatory submissions. The steps below primarily apply to private limited companies, with minor variations for public entities (e.g., additional compliances under listing regulations, if applicable). Ensure all actions are documented meticulously.

1. Review the Articles of Association (AoA)

Examine the Articles of Association (AoA) to confirm if it explicitly authorizes the company to increase its authorised share capital under Section 61. If not, amend the AoA first by convening a board meeting and an Extraordinary General Meeting (EGM) and passing a special resolution under Section 14. Also, file the Form MGT-14 with the Registrar of Companies (RoC) within 30 days, attaching the special resolution, altered AoA, and explanatory statement. This step ensures legal validity for the capital increase.

2. Convene a Board Meeting

• Issue a notice at least seven days in advance to all directors, specifying the agenda of the meeting.

• In the meeting:

1. Discuss and approve the proposed increase in authorised share capital.
2. Authorize alterations to the capital clause in the MoA.

• Fix the date, time, venue, and agenda for an EGM to seek shareholder approval.

1. Authorize a company secretary or director to oversee the process and provide the necessary authority.
2. Record the resolutions in the board minutes, which will be required for subsequent filings.

3. Hold the Extraordinary General Meeting (EGM)

• Send notices to all shareholders at least 21 days prior (or shorter with consent from 95% of voting shareholders for private companies).

• In the EGM, present the proposal for increasing the authorised share capital, pass an ordinary resolution, and ensure the resolution specifies the new authorised capital amount.

4. Prepare and Alter Company Documents

Update the MoA to reflect the new authorised share capital in the capital clause. Obtain certified true copies of the ordinary resolution from the EGM, the altered MoA, and the board resolution.

5. File the E-form and Pay Stamp Duty

Submit e-Form SH-7 electronically within 30 days of the EGM resolution. Key attachments include a certified copy of the ordinary resolution, the altered MoA, the notice of the EGM, and an explanatory statement under Section 102. Payment of stamp duty on the increased capital (varied by state) is also required to be made. Pay the prescribed filing fee, which depends on the nominal share capital. Upon approval, the RoC issues a certificate confirming the alteration.

6. Post-Filing Compliances:

Update company records, including share registers and statutory books. Inform banks, investors, and other stakeholders of the change. For public companies, additional filings may be needed with stock exchanges if listed.