As per Section 2(8) of The Companies Act 2013 defines that “Authorised capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company. Authorized Capital is the amount of capital with which company is registered with Registrar of Companies
The Companies Act 2013 allows the companies to alter its authorised share capital with certain procedures which are governed by Section 61-64 of the Act along with Section 13 and 14 of the Act which governs the alterations to the Chartered Documents being the Memorandum Of Association and Articles Of Association of the company. This means Authorized capital can be increased, only if it is authorized by Article of Association and after passing an ordinary resolution in the meeting of members. (If increase is not authorized by AOA, appropriate steps to alter the Article and include the clause is taken)
Generally, the companies registered with a small authorised capital and increased as per the requirements or conditions imposed by the lender/investors, customers (particularly the government companies and large corporates where the capital and net worth of the suppliers are prescribed and when the company wants to issue the bonus shares).
An increase in authorised capital and issuing new shares to existing promoters, a board meeting needs to be called and Form PAS-3 needs to be filed with the Registrar of Companies (ROC), intimating the allotment of shares.
Whereas, issuing shares to new shareholders is separate procedure, necessitating a valuation report from a chartered accountant.
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. 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 Authorised share capital of the company. The procedure for the increase in the Authorised share capital is as follows: -
1. Check the Article of Associations
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.
Procedure for alteration of Article of Association
For alteration of the Article of Association, the Company shall have to take the approval of the shareholders in the General meeting being held by the company. The General Meeting can be either Annual General Meeting (AGM) or Extraordinary General Meeting
The documents required for the alteration of the Articles of Association are as follows:
To give effect to the resolution, the Company needs to file the form MGT – 14 within 30 days of passing the shareholder’s resolution.
2. Call the Board meeting
The next step in this process is to call the Board meeting in which it is to be decided whether an AGM/EGM to be called to discuss the date, time and venue of the General Meeting.
After this, a notice is to be issued to each and every shareholder, directors, auditor of the company to discuss the matter of raising authorised share capital of the company.
3. Hold Extra Ordinary General Meeting
The next step in this process is to pass an Ordinary resolution to increase the authorised share capital of the company.
4. Filing of Form SH-7
The final step in this process is to file the Form SH – 7 within 30 days of passing the ordinary resolution. Along with the Form SH – 7, the following are the attachments that need to be attached:
The increase in capital shall receive following consent or approval
The form must be filed within 30 days after obtaining consent from shareholders for the share capital increase. The resolution passed is notified in MGT-14 and notice of increase is filed in SH-7 with altered MOA and AOA.
Yes, the total authorized and paid-up capital is displayed on the Master Data of the company on the MCA portal.
The Government fee for any e-form filed with MCA depends on the authorized capital of the company. With the increase in Authorised capital, the Government fee for online filing also increases, however to a nominal extent.
The shares of the company shall be transferred by way of executing the Share Transfer deed and by affixing the stamps as per the rates mentioned in the Stamp Act of the concerned State after the change.
