Increase In Authorized Capital
Company Authorized Capital Increase
As per Section 2(8) of the Companies Act, 2013, Authorized Capital is the maximum amount of share capital that a company is legally permitted to issue as stated in its Memorandum of Association (MoA).
This authorized capital sets the ceiling for how much capital a company can raise by issuing shares to shareholders. If the company plans to grow beyond this limit by raising more funds, it must first increase its authorized capital.
Authorized Capital vs Paid-Up Capital
- Authorized Share Capital is the maximum potential share capital a company can issue.
- Paid-Up Capital is the actual amount of money the company has received from shareholders against issued shares.
A company’s paid-up capital cannot exceed its authorized capital. When the paid-up capital reaches the authorized limit, the company has two options if it wants to onboard new investors:
- Increase the authorized capital to issue additional shares, or
- Facilitate the transfer of existing shares from current shareholders to new investors.
Increasing authorized capital means raising the limit on the maximum share capital the company can issue. This requires amending the Memorandum of Association (MoA) to reflect the new authorized capital.
By doing so, the company gains the ability to issue more shares and raise additional funds from existing or new shareholders. Companies often increase authorized capital to:
- Support business expansion
- Finance new projects
- Meet new financial or regulatory requirements
popular questions
Find answers to your questions
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
During company registration, the authorized and paid-up capital are fixed in the MoA. To issue shares beyond this, the MoA must be amended by increasing the authorized capital clause.
Common reasons include:
- Meeting significant capital requirements
- Funding new business initiatives or projects
- Facilitating mergers, acquisitions, or restructuring
- Issuing new shares for growth
- Converting debt into equity
- Complying with regulatory mandates
- Expert guidance on amending MoA and AoA
- Professional handling of Form MGT-14 and Form SH-7 filings
- Timely completion with full regulatory compliance
- Transparent, end-to-end support tailored to your business needs
After shareholders approve the increase, the company must file the necessary forms with the Registrar of Companies (ROC) within 30 days. Required documents include:
- Updated Memorandum of Association (MoA)
- Updated Articles of Association (AoA), if amended
- Certified copy of the shareholders’ ordinary resolution approving the increase
Review the Articles of Association (AoA)
Check if the AoA allows changes to authorized capital. If not, the AoA must be amended as per Section 14 of the Companies Act, 2013.
- Convene a Board Meeting
Send at least 7 days’ notice to directors. Pass a resolution to call an Extraordinary General Meeting (EGM) to approve the capital increase.
- Notify Shareholders
Send EGM notices at least 21 days before the meeting (can be shorter if 95% of shareholders consent). Include agenda, date, time, and voting details.
- Hold the Extraordinary General Meeting (EGM)
Present the proposal and pass the ordinary resolution to increase authorized capital.
- File Required Forms with ROC
Within 30 days of the resolution, submit:
- Form MGT-14 (for filing the resolution)
- Form SH-7 (for alteration of authorized capital)
Include all supporting documents and pay the necessary e-stamp duty.
Important Details for ROC Filings
- Form MGT-14: Includes company info, resolution details, digital signatures, and attachments like the EGM notice, resolution copy, and updated MoA/AoA.
- Form SH-7: Details the new authorized capital and pays stamp duty online through MCA portal.
Post Increase Compliance
- Update all official company documents (MoA, AoA).
- Issue new shares to increase the paid-up capital within the new authorized limit.
Failure to comply with authorized capital increase procedures can result in:
- A fine of Rs. 10,000 initially
- Daily fines of Rs. 1,000 until compliance
- Penalties capped at Rs. 25 lakh
- Late filing of Form SH-7 incurs Rs. 1,000 per day until filed
