Process to Increase Authorized Capital

Authorized capital is the maximum amount of capital issued by the company. It is given under the capital clause of the memorandum of association. It is also known as nominal capital which can be increased as per the company’s requirement as it cannot issue shares more than its authorized capital.

The following are the steps of the process for an increase in the authorized capital:

Step 1: Check the Article of Association (AOA)

A company must check the provision in the articles whether it gives permission for changing the articles or not. In case, the provision is not mentioned in the AOA then it needs to be changed by the company.

Step 2: Holding the meeting of the Board of Directors (BOD) 

• A notice shall be sent before seven days to all the directors with the agenda of the board meeting.
• A board resolution is passed in the board meeting for conducting an extraordinary general meeting (EGM) of members and sending notifications for the same. An ordinary resolution for alteration in articles is to be passed in EGM. 
• The board resolution is passed when the majority of the director gives assent to the agenda.
• A notice containing the date, day, time, and venue of the meeting including the agenda.
• The notice is sent to all the directors, members, auditors, company secretary, debenture trustees and other stakeholders of the company.
• An EGM notice must be sent 21 days from the date of conducting the same. A shorter notice is sent when ninety-five percent of the members have given consent either in writing or electronic mode and who can vote in the meeting.
• The minutes of the board meeting shall be prepared within fifteen days from the date of conducting the board meeting.

Step 3: Conducting the Extraordinary General meeting (EGM)

In the meeting, an ordinary resolution is passed for increasing the Authorized share capital. The approval of members is received for the resolution passed with the attached explanatory statement.

Step 4: Filing of Form with the Registrar of Companies

A company is required to file E-Form SH-7 and MGT-14 for resolution with the registrar.

1. Form SH-7 is required to be filed within thirty days of passing the resolution. The following are the details of Form SH-7:

• Basic details like CIN, Name, and Address of the company.
• Resolution Type whether ordinary or special.
• General Meeting Date
• MGT-14 SRN
• The original authorized capital amount and the New authorized capital amount.
• Bifurcation of additional capital
• Stamp Duty Paid
• DSC requirement.

The Documents required for filing SH-7 are:

• A certified copy of ordinary resolution for change in capital

• Consent in the Shorter notice, when required
• Copy of altered MOA
• Copy of altered AOA
• Optional attachment if any

1. Form MGT-14 is required to be filed within thirty days of passing the resolution. 

The following are the details of Form MGT-14:

• Basic details like CIN, Name, and Address of the company.
• Purpose of filing the form
• Dispatch’s date of notice 
• Resolution passing date
• DSC required.

The Documents required for filing MGT-14 are:

• EGM notice with explanatory statement

• A certified copy of resolution
• Copy of altered MOA
• Copy of altered AOA

Step 5: Payment of stamp duty

The rate of stamp duty depends on the state where the office is located. The MCA portal has given an e-stamp duty rate.

Step 6: Intimation sent to the Stock Exchanges for Listed Entities

A listed company must be sent a copy of the altered MOA to the stock exchange within twenty-four hours of sending a notice to ROC. The company shall also post on the website in two working days.

Conclusion

A Memorandum of association is submitted with the authorized capital at the time of Incorporation of the company to the Registrar of Companies (ROC) for forming a company. The amount of capital can be changed by the company in the future in need of expansion of the business.