• Overview

  • Process

  • Required Document

  • Benifit

  • Common Mistake

  • FAQ

Overview

BACKGROUND/ OVERVIEW

To support growth, Indian businesses, especially Private Limited Companies, often raise funds by increasing their authorized share capital, regulated by the Companies Act, 2013. This process, subject to shareholder approval, enables flexibility in funding without the former requirement of a minimum paid-up capital, benefiting startups and business expansion. Adjusting authorized share capital through memorandum of association amendments facilitates easier access to funds compared to other alterations.

Process

PROCESS

  • Initiate a board meeting to discuss and approve the proposal for expanding the authorized share capital.
  • Pass a resolution empowering directors to take necessary actions for implementation.
  • Arrange an Extraordinary General Meeting (EGM) to seek shareholder approval.
  • Provide shareholders with a 21-day notice for the EGM, along with an explanatory statement.
  • Adopt a special resolution at the EGM to approve the expansion of authorized share capital.
  • Amend the memorandum of association to reflect the revised share capital.
  • Submit Form MGT-14 to the Registrar of Companies within 30 days of passing the resolution.
  • Obtain ROC endorsement upon satisfactory review of Form MGT-14.
  • Issue new shares in compliance with the Companies Act.
  • Update the share register and provide shareholders with share certificates.

Required Document

LIST OF DOCUMENTS REQUIRED

  • Certified true copy of the board resolution passed at the board meeting.
  • Certified true copy of the resolution passed at the shareholders meeting of the company.
  • Altered Memorandum of Articles
  • Altered Articles of Association

Benifit

BENEFIT

  • Draw in Investors: Augmenting authorized share capital allows for the issuance of additional shares to investors, facilitating the acquisition of capital for the company.
  • Support Expansion Endeavors: Amplifying authorized share capital can furnish the necessary funds for the expansion initiatives of your business.
  • Enhance Flexibility: The expansion of authorized share capital provides your business with the flexibility to issue shares as required, eliminating the need for recurrent shareholder endorsement.

Common Mistake

COMMON MISTAKES

  • Filing form after the due date
  • Not paying stamp duty on time
  • Using older version of form
  • Not attaching proper attachments while filing form

FAQ

FAQ

  • When shou Which forms are required for increasing the authorized share capital of the Company?

Form MGT 14 and SH 7 are required to be filed with the Registrar within 30 days from the date of passing the resolution for the increase in authorized share capital.

  • Why should the authorized share capital increase?

A company is required to increase the authorized share capital before issuing the new equity shares and increasing the paid-up capital. The Authorised share capital is the total value of the shares a company can issue.

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