Want to raise more funds to grow your business? Increasing your company’s authorised share capital is a smart move towards issuing additional shares when needed most.
To do it you need to get approval from your board of directors and shareholders through proper meeting and resolution under the companies Act, 2013. Then you update your company official document to reflect the new capital share limit.
A company cannot be allowed to issue shares exceeding the limit set in the constitution documents. Hence it is necessary to increase authorised share capital before issuing any additional shares.
Le’ts understand more about the procedure for increase in authorised share capital of public company with examples and more.
What do You Mean by Authorized Share Capital
Authorized share capital is also known as the registered or nominal capital of a company. It means the maximum amount of a share capital that a company is legally allowed to issue to its shareholders as written in the memorandum of association. In simple words, it is the maximum limit a company can raise money by issuing shares.
According to Section 2(8) of the Companies Act 2013 India, the company can raise its maximum share capital through its authorized capital that the company memorandum permits. The available limit can be extended through the process of legal procedures which require payment of specific fees.
Difference Between Authorized Share Capital and Paid up Capital
The difference between paid up capital and authorized share capital is very simple, Here are the side by side differences in both.
| Authorized Share Capital | Paid up Capital |
| The company can only raise its capital through share issuance according to the maximum limit established in its official documents. | The company has received actual funds from shareholders who purchased its shares. |
| The firm establishes authorized capital as its maximum permissible capital limit. | The company has received actual financial payments which represent its total paid-up capital. |
| It can use authorized capital to raise funds up to the established limit. | It can use its paid-up capital to access all of its collected financial resources. |
| The organization requires legal permission to modify its authorized capital limit. | The process of share issuance and payment receipt leads to changes in paid-up capital. |
| The company maintains its authorized capital at a level which equals or exceeds its existing paid-up capital. | The company maintains its authorized capital limit as the maximum which can be achieved by paid-up capital. |
Procedure for Increase in Authorised Share Capital
The process for increase in authorised share capital of listed company in India is governed by the companies act 2013, Here is the simple 7 step-by-step guide:
Step 1: Check AOA (Article of Association)
The first step is to verify whether the company article of association allows an increase in authorised share capital or not. If not then amend the AOA first by pressing a special resolution.
Step 2: Conduct Board Meeting
Now hold a board meeting and pass a resolution to approve the increase and call a general meeting afterward.
Pass Board Resolution to:
- Approve and increase authorised capital
- Fix time, date and venue for general meeting
- Approve notice for general meeting
Step 3: Hold General Meeting
After approval conduct an EGM (Extraordinary general meeting) or Annual general meeting with members.
Pass an Ordinary resolution under section 61 of the companies act 2013 to increase the authorised capital of the company.
Step 4: Filing with ROC
File the Form SH-7 with the Registrar of companies within 30 days of passing the resolution in the general meeting held earlier.
Documents required for increase in authorised share capital:
- Notice of Board Meeting
- Certified Copy of Board Resolution
- Notice of General Meeting (EGM/AGM)
- Certified Copy of Ordinary Resolution passed by shareholders
- Altered Memorandum of Association (MOA)
- Altered Articles of Association (AOA) (if amended)
- Form SH-7 to be filed with the ROC
- Copy of updated capital structure
- Proof of payment
Step 5: Payment
Pay the mentioned filing fee and additional stamp duty if required:
Authorised share capital fee structure:
| Authorised Share Capital (₹) | Normal Filing Fee (₹) |
| Up to 1,00,000 | 5,000 |
| 1,00,001 – 5,00,000 | 5,000 + 400 per 10,000 |
| 5,00,001 – 10,00,000 | 21,000 + 300 per 10,000 |
| 10,00,001 – 50,00,000 | 36,000 + 300 per 10,000 |
| 50,00,001 – 1,00,00,000 | 1,56,000 + 100 per 10,000 |
| Above 1,00,00,000 | 2,06,000 + 75 per 10,000 |
Step 6: ROC Approval
Once all the documents are verified, ROC will increase the authorised share capital for your company, and will be updated in the official records also.
Step 7: Company Record Update
The companies MOA (Memorandum of association) gets updated and statutory register and other official records reflects the increase authorised share capital.
How to Calculate Authorized Share Capital
The calculation of authorised share capital is very simple, Here’s how you can calculate it:
(Authorized Share Capital = Total Number of Authorized Shares × Face Value per Share)
Example:
The authorized share capital for a company that can issue 1,00,000 shares with a face value of ₹10 each will equal 1,00,000 shares multiplied by the face value of ₹10 which results in a total of ₹10,00,000.
Calculation: 1,00,000 × ₹10 = ₹10,00,000
Key Points to Remember
- The limit of authorized capital defines the maximum amount that a company can raise but actual funds raised will always fall short of this maximum.
- The company registration process establishes authorized capital which the company must write in its Memorandum of Association (MoA) document.
- A company needs to complete legal requirements and pay necessary costs to raise its authorized capital after its initial establishment.
The concept needs to be understood because it establishes the future equity issuing capacity that a company will have to investors.
To Sum Up
You can increase your company’s authorized share capital through a simple process by following the Companies Act 2013 procedure. The organization must execute all procedures starting from AOA evaluation through board and shareholder resolution passage until Form SH-7 submission to the ROC in order to fulfill legal obligations.
The business needs to keep its authorized share capital current because it enables financial flexibility for both expansion plans and new share issuance. People should contact company secretaries whenever they have uncertainty because this will help them avoid both delays and penalties.
Plan smart, stay compliant, and give your business the capital it needs to scale! Need expert help? Reach out to Regible Corporate Advisor LLP today and let our professionals handle your authorised share capital increase smoothly, accurately, and on time.
