What is authorized capital? According to Section 2(8) of the Companies Act, 2013, “Authorized Capital” denotes the highest amount of share capital that a company’s memorandum permits. This capital signifies the extent to which the company can expand its operations. Should the company need to infuse additional funds beyond its initial capital, it must increase its authorized capital in accordance with the procedures outlined in this article. Authorized Share Capital increase Before issuing new equity shares and increasing the paid-up capital, a company may find it necessary to augment its authorized share capital. This is because authorized share capital represents the total value of shares a company is permitted to issue. The paid-up capital, on the other hand, signifies the total value of shares that have already been issued by the company. It’s important to note that the paid-up capital cannot surpass the authorized capital. For example, if a company has an authorized capital of Rs. 10 lakhs and a paid-up capital of Rs. 10 lakhs, and wants to attract new shareholders, it has two viable choices: Increase the authorized share capital and subsequently issue new shares. Facilitate the transfer of shares from existing shareholders to new shareholders.
Verify AOA of the Company Prior to commencing the steps to increase the authorized share capital, it’s crucial to review the Articles of Association (AOA) to confirm the presence of a provision regarding such an increase. In the absence of such a provision, the company must amend its AOA before proceeding with the capital increment process. Convene a Board Meeting To expand the company’s authorized share capital, it is imperative to schedule a board meeting, notifying the directors accordingly. During this meeting, the approval of the Board of Directors must be secured for the proposed increase in the authorized share capital. Extra-Ordinary General Meeting Organize the special shareholders’ meeting to secure approval for the expansion of the authorized share capital at the specified time, date, and venue as indicated in the notice. File ROC Forms After passing the ordinary resolution at the Extraordinary General Meeting, the company is required to submit Form SH7 within 30 days. This entails paying the prescribed government fee for the authorized capital and providing the following documents: 1.Notice pertaining to the Extraordinary General Meeting. 2.Authenticated copy of the ordinary resolution. 3.Amended Memorandum of Association reflecting the increased authorized capital. 4.Allotment of Shares 5.After raising the authorized share capital, the company can boost its paid-up share capital by issuing new equity shares.
The authorized share capital of the company is specified in Clause V of the MOA.
Forms MGT 14 and SH 7 must be submitted to the Registrar within 30 days from the date when the resolution for increasing the authorized share capital is passed.
It is necessary for a company to boost its authorized share capital prior to issuing new equity shares and augmenting the paid-up capital The authorized share capital represents the total value of shares that a company is permitted to issue.
Private Limited Companies must possess a minimum authorized share capital of Rs. 1 lakh, while public limited companies are required to have a minimum of Rs. 5 lakh.
Yes, it is imperative to elevate the authorized share capital of the company.
