Increase in Authorised Capital

You are running your business. You have a private limited company in which you are running your business. You realise that your business is doing well but you need to invest more money for buying machines, employing more staff. The business is not generating enough money that can be used as investment. So you have decided to invest more of your personal money in return for equity shares of the company.

Thus, you will want the company to issue shares to you. Remember you have to keep in mind that if your company has more than one shareholder, you will have to take permission from all the shareholders to bring in this money and be issued shares in lieu of the money.

There may be the following scenarios:

1. The shareholders will agree and allow you to bring in additional money. 

This will impact the shareholding of all existing shareholders as those who are not bringing in the money will have a lesser percentage of shares with them thus lesser voting rights. You will own more shares and your voting rights will increase.

2. The shareholders will not agree to you alone bringing in the money. 

They all will want to contribute in proportion such that their voting rights remain the same.

3. The shareholders do not want anyone to bring in additional money

In such a case, you may want to understand the reasons  and this will result in you making decisions for protecting and growing the business and you will take certain decisions that will have far reaching repercussions. This will be discussed in a separate topic.

Once you have decided on any of the 2 courses, you may seek the advisory services from SeedUp to help you with bringing in additional capital in the form of equity by booking a FREE expert call.

It may so happen that our Expert may advise you that before you can issue the shares, you will first have to increase the Authorised Share Capital of the Company. 

What is the authorised share capital of a Company?

The state government charges a stamp duty on how much money a Company can raise from the public. Similarly, the Central government charges a fee to give a limit to the Company  to raise money from the public either through equity or preference shares. This is the upper limit. It is called the Authorised Share Capital. 

Thereafter you may decide to bring in just a portion of this total limit. This limited portion is called the Paid Up capital. You may keep issuing shares upto the upper limit. But once you reach this upper limit you will be required to take further permission from shareholders of the company to increase the authorised capital of the company and then partying fees to the central government and stamp duty charges to the State government. The central government fees is fixed across the country, but the state government fees vary from state to state.

Where is the authorised share capital of the company recorded? Where should the changes be done?

The MCa portal has all such records. The Company’s incorporating document Memorandum of association has the details under its Capital clause. This Capital clause has to be increased by following the process of alteration of Memorandum of Association under the Companies act, 2013

Procedure to increase the authorised share capital is as follows:

1. Call a board meeting to discuss the requirement of raising of further capital in form of shares and pass a Board resolution
2. Discuss the alteration of the Capital clause of the Memorandum of Association of the Company.
3. Calling of an Extraordinary General Meeting to take shareholders approval for alteration of Memorandum of Association of the Company and to increase authorised share capital.
4. Issue of Notice for calling Extraordinary General Meeting
5. Filing of Form SH-7 with the Registrar of Companies with requisite fees.

Board resolution for Increase in authorised Share Capital of the Company

“Resolved that in accordance with Sections 4, 13 and 61 of the Companies Act, 2013 and Rules made thereunder, and any other applicable law or laws, rules and regulations (including any amendments thereto or re-enactment thereof for the time being in force,and pending approval of the shareholders of the Company, approval of the Board is given to increase the authorised share capital of the Company from Rs.«Amt_of_AC»/- (Rupees «Amt_of_AC_in_words» only) to Rs. «Total_Amt_of_AC»/-(Rupees «Total_Amt_of_AC_in_words» only) divided into «Total_No_of_shs_AC» («Total_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only) each by creation of further «Increase_No_of_shs_AC» («Increase_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only)  each amounting to Rs.«Increase_Amt_of_AC» (Rupees «Increase_Amt_of_AC_in_words» only).

Resolved further that in accordance with Sections 13 and 61 and any other applicable provisions of the Companies Act, 2013, Clause V of the Memorandum of Association of the Company, including the marginal notes thereto, be and is hereby deleted and be substituted with the following new Clause V:

“V. The Authorised share capital of the company is Rs. «Total_Amt_of_AC»/-(Rupees «Total_Amt_of_AC_in_words» only) divided into «Total_No_of_shs_AC» («Total_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only) each.”

Resolved further that the Directors of the Company be and are hereby, singly and jointly, authorised to take the necessary steps, file necessary forms and do all such acts, deeds and things as may be necessary in this regard to give effect to this resolution.”

NOTICE for calling Extra-Ordinary General Meeting

NOTICE is hereby given that the «EOGM_No» Extra-Ordinary General Meeting of the Members of the Company will be held at the Registered Office of the Company at «Address» on «Date_of_EOGM», «Date_of_EOGM» at «Time», to transact the following business:

 Special Business:

1.        Increase of Authorised Share Capital

To consider and if thought fit to pass, with or without modifications, the following resolution as an Ordinary Resolution: 

“Resolved that in accordance with Sections 4, 13 and 61 of the Companies Act, 2013 and Rules made thereunder, and any other applicable law or laws, rules and regulations (including any amendments thereto or re-enactment thereof for the time being in force, shareholders approve that the authorised share capital of the Company be and is hereby increased from Rs.«Amt_of_AC»/- (Rupees «Amt_of_AC_in_words» only) to Rs. «Total_Amt_of_AC»/-(Rupees «Total_Amt_of_AC_in_words» only) divided into «Total_No_of_shs_AC» («Total_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only) each by creation of further «Increase_No_of_shs_AC» («Increase_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only)  each amounting to Rs.«Increase_Amt_of_AC» (Rupees «Increase_Amt_of_AC_in_words» only).

Resolved further that in accordance with Sections 13 and 61 and any other applicable provisions of the Companies Act, 2013, Clause V of the Memorandum of Association of the Company, including the marginal notes thereto, be and is hereby deleted and be substituted with the following new Clause V: 

“V. The Authorised share capital of the company is Rs. «Total_Amt_of_AC»/-(Rupees «Total_Amt_of_AC_in_words» only) divided into «Total_No_of_shs_AC» («Total_No_of_shs_AC_in_words») Equity Shares of Rs.«FV_of_sh»/- (Rupees «FV_of_sh_in_words» only) each.”

Resolved further that the Directors of the Company be and are hereby, singly and jointly, authorised to take the necessary steps, file necessary forms and do all such acts, deeds and things as may be necessary in this regard to give effect to this resolution.”  

NOTES:

1. The relevant Explanatory Statement pursuant to Section 102 of the Companies Act, 2013, setting out the material facts concerning item(s) of special business to be transacted at the «EOGM_No» Extra-Ordinary General Meeting (EGM) is annexed hereto and forms part of this Notice.

2.  The Meeting is being convened at a shorter notice, with the written consent of more than 95% of the Members of the Company entitled to vote in pursuance with the provisions of Section 101 of the Companies Act, 2013.

3.  A Member entitled to attend and vote at the EGM is entitled to appoint a proxy to attend and vote instead of himself and the proxy need not be a Member of the Company. The instrument appointing the proxy duly completed, stamped and signed should, however be deposited at the registered office of the company not less than forty-eight hours before the time scheduled for commencement of the EGM.

4.  Corporate Members are requested to send a duly certified scanned copy of the Board Resolution authorising their representative(s) to attend the EGM and vote at the EGM. The said resolution/ authorisation shall be sent to the Company through its registered email address to «Email».

5.  All relevant documents referred to in this notice and the explanatory statement will be available for inspection by the members at the registered office of the Company during normal business hours on all working days (except Saturday(s) and Sunday(s) and public holiday(s)) up to the date of the EGM and during the continuance of EGM.

6.  Attendance will start at 9:45 am

7. Route Map to the venue is attached herewith.

Route Map to be given

Explanatory Statement u/ s 102 of the Companies Act, 2013

Item No 1 

The Company at its Board Meeting held on «Notice_Date_of_EOGM», is proposing to raise funds for expansion of the Company’s production unit and investments in capital machinery. Since the present Authorised Share Capital of the Company is not sufficient for such further raising of Capital, the Company has to increase its Authorised Share Capital by altering Clause V of the Memorandum of Association. Thus, the Company is proposing to increase the Authorised Share Capital from Rs. «Amt_of_AC»/- to Rs.«Total_Amt_of_AC»/-

None of the Directors & their relatives are interested in the above resolution. 

The Directors recommend the said resolution for the approval of members of the Company by way of special resolution.