Increase in Authorized Share Capital of Company
In the Companies Act 2013, the procedure for the increase in the Authorised share capital has been governed in sections 61 and 64 of the Companies Act 2013.
Authorized share capital is the total value of shares a company can issue, while paid-up capital is the total value of shares the company has issued.
Paid-up capital can never exceed authorized capital.
In any case related with the share capital in the process of increasing the paid-up share capital of the company by issuing the fresh equity shares, the first step that needs to be taken into consideration is the Increase in the Authorized share capital of the company.
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Procedure for the increase in the Authorized Share Capital
🔯 Step 1 : Check the Article of Associations for the clause regarding Increase in the Authorized share capital
The first step is to check the clauses of AOA regarding the increase in the share capital of the company. If there is no clause in AOA regarding the same, then the Articles of Association shall have to be altered.
Most of the AOA’s will have enabling provisions for increasing authorized share capital
If such authority is not provided for in the Articles of Association, then the provisions in AOA has to be amended to include provisions authorizing the company to increase its share capital.
Such amendment could be done by passing of Special Resolution. To give effect to the resolution, the Company needs to file the form MGT – 14 within 30 days of passing the shareholder’s resolution.
Form MGT-14 is only required to be filed in case of special resolution passed for the alteration of the AOA, otherwise not required.
🔯 Step 2 : Call the Board meeting
Convene a board meeting by giving at least 7 days prior notice and Seek approval of the Board of directors regarding –
➤ Approval of increase in authorized capital
➤ Calling of EGM/AGM & fixing of day, date, time, venue etc.
➤ Authorizing CS/ director/ auditor for signing notice, filing of forms.
🔯 Step 3 : Hold Extra Ordinary General Meeting
Convene EGM by giving at least 21 days’ notice and can also give shorter notice, if 95% of the member gives their consent in writing.
➤ Send Notice of general meeting to all members along with Explanatory Statement (Section-102), Proxy Form, Route Map and Attendance Slip.
➤ Hold the general meeting and get approval of the members by passing a Ordinary resolution.
🔯 Step 4 : Filing of Form SH-7
The next and final step in this process is to file the Form SH – 7 within 30 days of passing the ordinary resolution make the payment for the stamp duties online.
Along with the Form SH – 7, the attachments that need to be attached along with the form are as follows:-
➤ Notice for the Board meeting
➤ Board resolution for an increase in authorized share capital and amendment in capital clause of MOA
➤ Notice of EGM, Explanatory Statement
➤ Shareholder’s resolution ,Minutes of EGM
➤ Amended copy of MOA
🔯 Step 5 : Changes on MCA Website
With the approval received from ROC for the Form SH-7 filed with MCA, the changed status of authorized capital of the Company can be checked at MCA site.
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