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There are so many benefits of increasing authorized share capital, like:-
  • Helps in business expansion
  • Increase the borrowing capacity
  • Increase company share capital
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Increase Authorized Capital

An Overview - Increase Authorised Share Capital

According to Section 2(8) of the Companies Act, 2013, 'authorised capital' or 'nominal capital' refers to the capital that is authorised by a company's memorandum to constitute the company's maximum share capital.

As a result of the above definition, it is evident that a firm may expand up to the level of authorised capital. If you wish to develop your company through the infusion of more cash, you must first increase your authorised capital by following the steps mentioned below in the procedure for increasing authorised capital.

Each firm requires increasing capital over time to operate. These money may be necessary throughout the long or short term. Loans and advances might be used to meet a short-term requirement. However, the company will require additional funding for the run. This can be accomplished with a Private Limited Company by increasing the company's authorised capital. Due to the fact that the private limited company is governed and regulated by the Company Act, any modifications to the structure must adhere to the Act and its requirements.

Documents required to Increase Authorised Share Capital

The mandatory documents required to increase the Authorised share capital are:-

  • Notice of the EGM, together with an Explanatory Statement in accordance with Section 102.
  • A certified copy of the EGM resolution.
  • A copy of the new memorandum of association (changes made in the Capital Clause).
  • A copy of the altered AOA (provision for the increase in authorised share capital).

Benefits of Increasing Authorised Capital

Increases the Company's capital

A company may raise as much authorised capital as it wishes, and the amount will be specified in the Memorandum of Association with amendments. Thus, increasing authorised capital has a cumulative effect on the total share capital of the company.

Significantly Increases Borrowing Capacity

The rise in share capital results in an increase in the company's overall net value. This substantially strengthens the company's borrowing capabilities.

Expansion of Business

Each company need additional capital over time to expand. These money may be necessary throughout the long or short term. Loans and advances might be used to meet a short-term requirement. However, the company will require further funding to expand.

A detailed process to Increase Authorised Capital

  • 1

    Determine whether the company's Articles of Association permit it to raise its authorised capital.

  • 2

    If the AoA is not authorised, a special resolution must be passed to amend it.

  • 3

    Call a board meeting & approve an increase in the company's authorised capital, as well as the day, date, time, and location of the EGM.

  • 4

    Notify all company members/shareholders, directors, and auditors of the company for meeting's day, date, time, location, and agenda.

  • 5

    Convene, hold, and conduct an EGM on the designated date, location, and time, and pass a resolution seeking shareholder approval.

  • 6

    If any forms are required, they must be completed and submitted within a specified time period.

  • 7

    Amend the Memorandum of Association of the company in order to increase the authorised share capital.

  • 8

    Submit form SH-7 to the registrar of companies within 30 days of passing the shareholders' resolution.

  • 9

    If the resolution is adopted as a special resolution, you must also file form MGT-14 within 30 days of its adoption.

FAQs on Increase in Authorised Capital

Each company need additional capital over time to expand. These money may be necessary throughout the long or short term. Loans and advances might be used to meet a short-term requirement. However, the company will require further funding to expand.
Yes, the share capital of the company can be increased by following the applicable procedure.

There are so many benefits of increasing authorized share capital, like:-

  • Helps in business expansion
  • Increase the borrowing capacity
  • Increase Company’s share capital
If the AoA of the company permits the increase in the authorized share capital, then the company can increase its share capital. The company is also required to get approval from its members by passing a special resolution in the general meeting.

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