The authorised share capital of a company is the maximum amount of share capital that the company is authorized to allocate to its shareholders. No company has a right to issue shares exceeding the authorised capital.
But when the business is on the rise, and there is need for more investment then the law has given the right to increase the authorised capital and ask for more investment.
Procedure to increase the authorised capital of a company is as follows:
- Holding Extraordinary General Meeting: Extraordinary Meeting need to be called by giving a notice for the same for alteration in the authorized capital of the company. Minutes has to be recorded describing the capital already invested in the company and the amount of capital required to be increased.
- Resolution : The ordinary resolution in the meeting for the increase of authorised share capital.
- Issue notice for EGM: A notice has to be issued to the members, director and shareholders of the company for EGM in accordance to the cause of the meeting.
- Authorize in Articles: There should be a clause in Articles of association allowing for the increase in the authorised capital of the company, if there is no such provision found then articles have to be altered beforehand by passing a special resolution for the same.
- Registrar of Companies Form Filing: After passing the ordinary resolution, the next step is to file the form SH-7 within 30 days of resolution with the concerned registrar of companies.
- Documents: Along with the form SH-7, attach the following documents and fees prescribed
- Notice of Extraordinary General Meeting.
- Certified and true copy of ordinary resolution.
- Altered memorandum and articles of association, in case.
- After receiving the Forms and the attached documents, the concerned registrar of companies will check and then approve for the increase of authorised share capital.
It is important to note that the notice of the increase of capital must be given to the registrar within 30 days along with altered articles and memorandum. There is no need to pass any special resolution for this reason.