Information

Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the business.

Why & How to increase Authorized capital?

A company may need to increase its authorized share capital before issuing new shares and increasing paid-up capital. 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.

A company may need to increase its authorized share capital before issuing new shares and increasing paid-up capital. Paid-up capital can never exceed authorized capital. Hence, if a company having an authorized capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs would like to induct new shareholders, it can do so either by:

  • Increasing authorized share capital and issuing new shares.
  • Transferring shares from existing shareholders to the new shareholders.

Advantages of Partnership :-

  • Money to grow the business: With an infusion of cash derived from the sale of stock, the company may grow its business without having to borrow from traditional sources.
  • Money for shareholders and others: With more cash in the company offers, additional compensation may be offered to investors, stakeholders, founders and owners, partners, senior management and employees enrolled in stock ownership plans.
  • Other benefits of going public: Once the company has gone public, additional equities may be easily sold to raise capital. A publicly-traded company with stock that has performed successfully will usually find it easier to borrow money.

Documents / Information :-

  • Form SH-7
  • Certified true copy of shareholder resolution(s) along with copy of explanatory statement under Section 102.
  • Altered memorandum of association (Mandatory in case any change in MOA).
  • Altered articles, if needed.

Note: Company cannot file SH-7 until unless the company has filed INC-22A

FAQ :-

What is the difference between Authorized Capital & Paid up capital?

The Authorized Capital of the Company is the maximum limit upto which a Company can issue shares and Paid Up Capital is that part of the Authorized Capital for which Shareholders have made the investment into the Company.

What documents are required for increasing the capital?

MOA, AOA, documents for Board Meeting of the Company and documents for Extra Ordinary General Meeting (EGM) of the Company.

What is time limit to file change of capital documents with ROC?

The time limit is 30 days from passing of the Board Resolution for Increasing of Authorized Share Capital.

How to change the Authorised Share Capital of the Company as per Companies Act 2013?

A company can increase its authorized capital by filing Form SH-7 within 30 days from the date of passing the resolution i.e. from the date of alteration.

Whether General Meeting is mandatory to hold for change in Authorised Share Capital of the company?

Yes, Holding of AGM is mandatory to increase authorised share capital.

Information

Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the business.

Why & How to increase Authorized capital?

A company may need to increase its authorized share capital before issuing new shares and increasing paid-up capital. 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.

A company may need to increase its authorized share capital before issuing new shares and increasing paid-up capital. Paid-up capital can never exceed authorized capital. Hence, if a company having an authorized capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs would like to induct new shareholders, it can do so either by:

  • Increasing authorized share capital and issuing new shares.
  • Transferring shares from existing shareholders to the new shareholders.
  • Money to grow the business: With an infusion of cash derived from the sale of stock, the company may grow its business without having to borrow from traditional sources.
  • Money for shareholders and others: With more cash in the company offers, additional compensation may be offered to investors, stakeholders, founders and owners, partners, senior management and employees enrolled in stock ownership plans.
  • Other benefits of going public: Once the company has gone public, additional equities may be easily sold to raise capital. A publicly-traded company with stock that has performed successfully will usually find it easier to borrow money.
  • Form SH-7
  • Certified true copy of shareholder resolution(s) along with copy of explanatory statement under Section 102.
  • Altered memorandum of association (Mandatory in case any change in MOA).
  • Altered articles, if needed.

Note: Company cannot file SH-7 until unless the company has filed INC-22A

What is the difference between Authorized Capital & Paid up capital?

The Authorized Capital of the Company is the maximum limit upto which a Company can issue shares and Paid Up Capital is that part of the Authorized Capital for which Shareholders have made the investment into the Company.

What documents are required for increasing the capital?

MOA, AOA, documents for Board Meeting of the Company and documents for Extra Ordinary General Meeting (EGM) of the Company.

What is time limit to file change of capital documents with ROC?

The time limit is 30 days from passing of the Board Resolution for Increasing of Authorized Share Capital.

How to change the Authorised Share Capital of the Company as per Companies Act 2013?

A company can increase its authorized capital by filing Form SH-7 within 30 days from the date of passing the resolution i.e. from the date of alteration.

Whether General Meeting is mandatory to hold for change in Authorised Share Capital of the company?

Yes, Holding of AGM is mandatory to increase authorised share capital.