AUTHORIZED SHARE CAPITAL INCREASE
A company wish to increase the authorized share capital of the company before issuing new equity shares and increasing paid-up capital. Authorized share capital is the total value of shares a company can be issued , while paid-up capital is the total value of shares the company has issued. Paid-up capital cannot be exceed by authorized share , if a company having an authorized capital of Rs.10 lac and paid-up capital of Rs.10 lac would like to induct new shareholders, it can be done by the company :
- Increasing authorized share capital and issuing new shares. (or)
- Transferring shares from existing shareholders to the new shareholders.
VERIFY AOA OF THE COMPANY
Before commencing the procedures for increasing the authorized share capital, verify the AOA to ensure there is enabling provision in the Articles of Association (AOA) particularly with reference to increase authorized share capital. If there are no provisions for increasing authorized share capital, the company must first make changes to the AOA of the company.
CONVENE BOARD MEETING
Increasing in the authorized share capital, first, convene in the Board Meeting by providing the proper notice to be served officially by email and post across to the Directors . At the Board Meeting, obtain approval from the Board of Directors for increasing the authorized share capital.
Finally, obtain approval of the Board of Directors of Company Secretary present at the meeting to present notice of Extra-Ordinary General Meeting to the shareholders. Based on the approval, present the Notice of Extra-Ordinary General Meeting to all shareholders, Directors and Auditor of the Company.
EXTRA-ORDINARY GENERAL MEETING
At the time, date and place mentioned on the Notice of Extra-Ordinary General Meeting, conduct the Extra-Ordinary General Meeting and obtain shareholders approval for increase of authorized capital. The approval of shareholders for increasing the authorized share capital must be in the form of an ordinary resolution.
FILE ROC FORMS
Once the ordinary resolution is passed at the Extra-Ordinary General Meeting, Form SH-7 must be filed by the company within 30 days from the passing of ordinary resolution along with Form SH-7, the prescribed government fee for authorized capital must be paid and the following documents must be attached:
- Notice related to EGM.
- Authorized True copy of Ordinary Resolution.
- Changed Memorandum of Association. (Showing higher authorized capital)
If the procedures for increasing authorized capital are followed as mentioned in the Companies Act and Companies Rules, then the Registrar would approve the filing and increase the authorized share capital of the company. The new authorized share capital of the company would be reflected on the MCA portal.
ALLOTMENT OF SHARES
Post the increase in authorized share capital, the paid-up share capital of the company can be increased by issuing fresh equity shares.