Increase in Authorized Share Capital

How can I increase in authorized share capital procedure?

To increase in authorized share capital of the company, we need to follow the set of procedures and rules mentioned in the Companies Act, 2013.  Authorized share capital means the maximum share capital of the company. Authorized share capital can also be called the Nominal share capital of the company. which we read in detail:

Steps to increase authorized share capital:

The following are the major reasons for increasing authorised share capital of the company:

Expansion Plans: One of the main reasons for the increase in authorized share capital is the plan for growth. By increasing the variety of stocks an agency can manage, it could raise extra capital through fairness percentage. Increase Authorized capital can be used for such things as acquiring property, investing in new tasks, or expanding operations.

Financial Flexibility: Increase in authorized share capital affords Financial flexibility is the most important part of determination of structure of the company’s capital and can be applied to maintain the debt capacity for the purpose of future development of the company or to minimize debts to avoid financial distress in an economic recession.

Attracting Investors: A higher authorised share capital enhances your company’s appeal to potential investors, reflecting a robust and scalable financial structure.

Stock Split: Increasing legal proportion capital can also facilitate A stock split is usually done to raise the liquidity of a company’s share in the stock market. The company investors owning company shares till the record date will receive the new shares in their demat accounts. The stock price will be adjusted according to the split ratio.

Cost Efficiency:

By anticipating future capital needs, you avoid unnecessary costs associated with multiple increments in authorised share capital.

Strategic Positioning:

A higher authorised share capital enhances your company’s appeal to potential investors, reflecting a robust and scalable financial structure.

How can the company raise capital?

Check the Article of Association of the Company: Check whether Articles of Association of Company contain a provision authorizing it to increase its Authorized Share Capital. If there is no such provision in the articles, then appropriate steps required to be taken to amend them.

Convene a Meeting of Board of Directors and pass the necessary Board Resolutions:

• To consider and approve an increase in authorized share capital,
• Altering the Memorandum of Association, subject to the approval of shareholders in the general meeting.
• To fix the day, date, time, and venue for holding the general meeting of the Company.
• To approve the draft notice of the general meeting along with an explanatory statement annexed to the notice as per the requirement of Section 102 of the Companies Act, 2013.
• To authorize the director or company secretary to sign and issue notice of the general meeting.

What is authorized share capital?

As per Section 2(8) of the Companies Act of 2013, authorized share capital means the capital that is specified in the company’s memorandum of association as a maximum amount of the share capital of the company and is referred to as “authorized capital.

The firm can grow up to the allowed capital level for the corporation. The company must increase the authorized capital by taking the actions described in this article if it needs to expand its business by investing more money than it did initially.

Convene the General Meeting:

Notice for the General Meeting:

A notice of the general meeting shall be given at least 21 clear days before the actual date of the general meeting in writing, by hand, by ordinary post, by speed post, by registered post, by courier, by facsimile, by e-mail, or by any other electronic means.

A shorter notice can be issued with the consent of at least a majority in number and ninety-five percent of such part of the paid up share capital of the company, giving a right to vote at such a meeting in accordance with Section 101.

The notice shall specify the day, date, time, and full address of the venue of the meeting and contain a statement on the business to be transacted at the meeting.

Hold the general meeting:

Hold the General Meeting on the fixed day, pass an Ordinary Resolution for increasing the authorized share capital, and make relevant changes in the Memorandum of Association (MOA).

File Form SH-7 with the ROC:

File a notice of alteration of share capital with the registrar in E-Form SH-7, along with the prescribed fee, within 30 days of such alteration, along with the following documents:

• Certified true copy of the Ordinary Resolution for an increase in authorized share capital.
• Copy of altered MOA Copy of the altered AOA, if any shorter notice consents.
• If there is any other document, as may be applicable,

Payment of e-Stamp Duty: Pay the e-stamp duty on the increased amount of the Authorized Share Capital through MCA Portal, if applicable.

Alteration in every copy of MOA and AOA: Every Alteration made in the Memorandum of Association and Articles of Association of the Company shall be noted in every copy of the same.

For more details, you can also check out the MCA website.