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Procedure to increase Authorised Share Capital

When an entrepreneur decides to get company registration, the most important factor to decide is the Share capital structure of the proposed company. Basically, a share capital is divided into two parts-Authorised Share Capital and Paid up Share Capital of the Company. The Authorised share capital means maximum amount of shares to be issued by company to its shareholders. Procedure to increase Authorised Share Capital is laid down in Companies Act, 2013.

Example:

XYZ Private Limited has authorised share capital of Rs 10,00,000/- and paid up share capital of Rs 50,000/- then a company can further issue shares upto Rs 10,00,000/- as the company’s Authorised Share Capital is Rs 10,00,000/- which means it is authorised to issue shares.

Is it possible to increase Authorised Share Capital?

Yes, a company can anytime increase authorised share capital of the company. Section 61 (read with section 13 and 14) of the Companies Act, 2013 deals with procedure to increase authorised share capital of the company.

Procedure to increase Authorised Share Capital

Companies Act, 2013 pursuant to Section 61 (read with section 13 and 14) allows for increase authorised share capital of the company.

Step 1: Check Articles of Association (AOA) of the Company

Articles of Association (AOA) means a bye law of the company which contains systematic set of rules and regulations of the Company. The pre condition for increase in authorised share capital is to check whether the Articles of Association of the company permits for such increase.

There are two situations-

1. Where AOA permits
Where there is separate clause for increase in authorised share capital in AOA then company can directly proceed for such increase.

2. Where AOA does not permits
In case if AOA does not permits for increase in Authorised Share Capital, then company first needs to amend AOA and then proceed for increase in authorised share capital.

Step 2: Conduct a Board Meeting

After verifying Articles of Association of the Company, next step is to conduct a board meeting. Consent of directors is required to be accorded in such board meeting. The directors shall then decide to call upon an EOGM i.e Extra Ordinary General Meeting. Date, place and time of EOGM shall be decided in such board meeting. A notice of EOGm shall be issued atleast 21 days before EOGM to all the members/ shareholders of the company.

Also notice shall contain the voting method utilised for passing special resolution to increase authorised share capital of the company. Explanatory statement pursuant to Section 102 of the Companies Act 2013 is to be enclosed along with notice of EOGM.

Step 3: Extra Ordinary General Meeting

After board meeting, EOGM is called on the decided date, time and place. In the meeting of members/ shareholders, proposal for increase in authorised share capital of company is placed before all shareholders of the company. The Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, is then passed to increase in authorised share capital of Company. Record the minutes of the meeting.

Step 4: Filling of Registrar of Companies (ROC) form

The Company after passing ordinary resolution in the EOGM need to file Form SH-7 with the Registrar of Companies (ROC) giving detailed particulars of increase in authorised share capital of the company. Following are the documents for increase in authorised share capital of company.

Documents for Form SH-7

While filling form SH-7 following documents are mandatory to attach-
1. Board Resolution certified true copy
2. Shareholders Resolution certified true copy
3. Notice of Extra Ordinary General Meeting
4. Minutes of Extra Ordinary General Meeting
5. Altered Memorandum of Association
6. Altered Articles of Association
7. Optional Attachment if any

Contents of Form SH-7

The Basic contents of form SH-7 for increase in authorised share capital is as follows
1. Corporate identity number (CIN) of the company
2. Name and Address of the company
3. Purpose of the Form
4. Particulars of payment of stamp duty