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🚀 Increasing Your Company's Authorized Capital
Every business needs additional funds over time—whether for expansion, new projects, or strategic investments. While short-term financial needs can be met through loans and advances, long-term growth often requires an increase authorised capital.
- Limited Liability: Keep your personal assets out of business messes.
- Fundraising Made Easy: Investors and banks love this structure.
- Perpetual Succession: Your business keeps running even if ownership changes.
- Tax Perks: Take advantage of corporate tax benefits.
For a Private Limited Company, this process involves legal formalities under the Companies Act, 2013. At Compliance Monk, we simplify this process, guiding you through every step to ensure compliance with regulatory requirements.
Let’s simplify your business growth! 📞Contact us today.
Key Advantages
Expert Guidance
Our skilled professionals will navigate you through every step, making the registration experience seamless.
Quick Turnaround
We value your time and ensure prompt services, helping you initiate your business promptly and effectively.
Reliable Support
Our dedicated support team is always ready to answer your questions, assisting you every step of the way.
Authorized Capital Increase
🔍 Understanding Authorized Capital
As defined in Section 2(8) of the Companies Act, 2013, authorized capital refers to the maximum amount of share capital a company is permitted to issue as per its Memorandum of Association (MOA).
A company cannot issue shares beyond its authorized capital unless it formally increases this limit through proper legal procedures.
🔹 Authorized vs. Paid-Up Capital
- Authorized Capital: The maximum share capital a company can issue.
- Paid-Up Capital: The portion of authorized capital that has been issued and paid for by shareholders.
If a company reaches its authorized capital limit but wants to raise funds by issuing more shares, it must increase its authorized capital first.
📈 Why Increase Authorized Capital?
A company may choose to increase its authorized share capital for various reasons, including:
✅ Raising funds for business expansion
✅ Issuing additional shares to new or existing shareholders
✅ Supporting mergers, acquisitions, or restructuring
✅ Converting debt into equity
✅ Meeting regulatory requirements
📑 Documents Required for Increasing Authorized Capital
🔹 Updated Memorandum of Association (MoA) with revised capital clause
🔹 Articles of Association (AoA) (if amended)
🔹 Board Resolution & Ordinary Resolution
🔹 EGM Notice & Minutes of Meeting
🔹 Digital Signatures & Director Identification Numbers (DINs)
🔹 Proof of E-Stamp Duty Payment
⚠️ Penalties for Non-Compliance
Failure to comply with regulatory requirements may result in:
- Penalty of ₹10,000 for initial non-compliance
- ₹1,000 per day of delay in filings
- Maximum penalty of ₹25 lakh for extended violations
Timely compliance ensures smooth operations and avoids unnecessary financial penalties.
Step-by-Step: 🏛️ Legal Process for Increasing Authorized Capital 🛤️
The process of increasing authorized capital involves a few key steps, including approvals, filings, and documentation.
1️) Review the Articles of Association (AoA)
Before proceeding, check if the company’s AoA allows for an increase in authorized capital.
- If permitted, move to the next step.
- If not, amend the AoA first by passing a special resolution.
2️) Hold a Board Meeting
- Issue a notice for the board meeting at least 7 days in advance.
- Pass a board resolution to convene an Extraordinary General Meeting (EGM) for shareholder approval.
3️) Conduct an Extraordinary General Meeting (EGM)
- Issue an EGM notice to shareholders, directors, and auditors at least 21 days before the meeting.
- Pass an Ordinary Resolution approving the increase in authorized capital.
4️) File ROC Forms for Approval
Within 30 days of the resolution, submit the following forms to the Registrar of Companies (RoC):
📌 Form MGT-14 (if applicable): Required for resolutions passed under Section 117 of the Companies Act.
📌 Form SH-7: Mandatory for notifying the RoC about the increase in authorized capital.
5️) Update Official Documents
Once the increase is approved:
- Update the Memorandum of Association (MoA) and Articles of Association (AoA).
- Make necessary changes in company records.
At Compliance Monk, we make increasing your company’s authorized capital effortless. Our expert team ensures:
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- Hassle-free documentation and filing.
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- Timely updates and transparent communication.
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- Guidance on choosing the right set of forms.
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- Continuous support throughout the process.
FAQs
1. What is authorized capital?
Authorized capital is the maximum amount of share capital a company is legally permitted to issue as stated in its Memorandum of Association (MoA).
2. Why should a company increase its authorized capital?
A company may increase its authorized capital to raise additional funds, issue new shares, support business expansion, finance new projects, or comply with regulatory requirements.
3. Can a company issue shares beyond its authorized capital?
No, a company cannot issue shares beyond its authorized capital. It must first increase the authorized capital through proper legal procedures.
4. What are the key steps to increase authorized capital?
The process includes:
- Reviewing the Articles of Association (AoA)
- Holding a Board Meeting to approve the increase
- Conducting an Extraordinary General Meeting (EGM) to pass a resolution
- Filing necessary forms (MGT-14 and SH-7) with the Registrar of Companies (RoC)
5. What documents are required to increase authorized capital?
Essential documents include:
- Updated Memorandum of Association (MoA)
- Articles of Association (AoA) (if amended)
- Board and shareholder resolutions
- EGM notice and meeting minutes
- Digital signatures and Director Identification Numbers (DINs)
6. How long does it take to increase authorized capital?
The timeline varies based on regulatory processing, but typically, it takes a few weeks after all approvals and filings are completed.
7. What are the penalties for non-compliance?
Failure to comply may result in a penalty of ₹10,000, with an additional ₹1,000 per day of delay, subject to a maximum penalty of ₹25 lakh.
8. Is shareholder approval mandatory for increasing authorized capital?
Yes, shareholder approval is required through an Ordinary Resolution passed in an Extraordinary General Meeting (EGM).
9. What forms need to be filed with the Registrar of Companies (RoC)?
- Form MGT-14 (if required) for special resolutions
- Form SH-7 for notifying the increase in authorized capital