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Authorised share capital sets the limit on the number of shares a private company can issue. Under the Companies Act, 2013, there’s no mandatory minimum increase. To raise authorised capital or issue more shares, the company must amend the capital clause in the Memorandum of Association (MOA) by passing an ordinary resolution.
The required capital increase varies by business and needs shareholder approval. For example, if a firm’s authorised capital is ₹2 lakhs, it can issue shares only up to that amount. However, this limit is flexible and can be increased if needed — such as raising it to ₹1 crore to accommodate a major investor.
Keep these key points in mind when increasing authorised capital:
A company can raise funds from the public only up to its authorised share capital limit. To raise more funds, increasing this capital is essential.
A company can decide its authorised capital and revise it in the Memorandum of Association (MoA), allowing room for expanding overall share capital.
Higher share capital boosts the company's net worth, enhancing its ability to secure loans or credit.
Sufficient authorised capital allows the company to accommodate potential investors easily.
The following documents must be submitted to the MCA within 30 days of receiving shareholder approval. For private companies, only SH-7 filing is needed; MGT-14 is not mandatory.
A company mainly uses four types of capital:
This is the money invested by shareholders. It’s the core funding of the company, helping it to run and expand its operations.
Funds borrowed from banks or other lenders. These must be repaid over time along with interest.
The money used for daily business expenses like salaries, rent, and supplies. It usually comes from a mix of equity and debt capital.
Funds set aside for buying and selling goods or services. This is often financed through borrowed money.
The amount and type of capital a company needs depend on its size and stage of growth. For example, startups usually require more equity capital compared to established firms.
For a private limited company, increasing the authorised share capital is governed by Section 61 of the Companies Act, 2013. A company can alter the capital clause in its Memorandum of Association (MoA) through an ordinary resolution at a general meeting, but only if its Articles of Association (AoA) allow this. After the change, Form SH-7 must be filed with the Registrar of Companies (ROC) within 30 days. Such an increase requires prior approval as per the AoA and member consent through a resolution passed at an Extraordinary General Meeting (EGM).
Start by examining the company's AoA to ensure it permits raising the authorised share capital. If not, the AoA must first be amended.
The board of directors must meet to discuss and approve the proposal for increasing share capital. A resolution should be passed mentioning the proposed amount of increase.
After board approval, call an EGM of shareholders. Notice of this meeting must be sent to all shareholders at least 21 days before the scheduled date.
During the EGM, shareholders must pass a special resolution to approve the capital increase. This requires the consent of at least 75% of the members present and voting.
Once the resolution is passed, submit the details to the ROC within 30 days using Form SH-7. The ROC will then issue a certificate confirming the change.
After approval, the company can issue new shares in accordance with its AoA, ensuring compliance with any specified conditions or restrictions.
Before proceeding, the company must convene a board meeting to check whether the Articles of Association (AOA) allow for increasing authorised capital. If the AOA does not permit this, it must first be modified before moving forward.
A general meeting of shareholders is called to pass an ordinary resolution approving the increase in authorised capital. If needed, amendments to the Memorandum of Association (MoA) are also made during this meeting.
After the resolution is passed, the company must file Form MGT-14 (for resolutions) and the relevant form for increasing authorised capital (usually Form SH-7) with the Registrar of Companies (ROC).
Once the forms are reviewed and found satisfactory, the ROC will approve the increase in authorised capital. The company’s details will then be updated on the MCA (Ministry of Corporate Affairs) portal.
As per the Companies Act, 2013, a company must pass a special resolution to increase its authorised share capital. This requires approval from at least 75% of the shareholders present and voting in the general meeting.
However, the company’s Articles of Association (AOA) may specify additional conditions or a higher approval requirement. Therefore, it's important to check the AOA before proceeding.
Before proceeding, the company must review its AOA to confirm that it allows an increase in authorised share capital. If not, the AOA should be amended first.
A board meeting should be held to discuss and approve the proposal for increasing the authorised share capital.
The shareholders must pass a special resolution approving the increase. This resolution must be filed with the Registrar of Companies (ROC) within 30 days.
The company must submit the required documents, including the special resolution and updated AOA, to the ROC for approval of the capital increase.
Once the ROC approves, the company can issue additional shares to raise funds as per the revised authorised capital.
Authorised share capital is the maximum number of shares a company can issue to its shareholders. It is stated in the Memorandum of Association (MOA) at the time of incorporation.
The amount of authorised share capital is decided by the company's promoters and directors based on future growth plans, funding needs, and financial projections.
If needed, the authorised share capital can be increased later by passing a special resolution and filing the necessary documents with the Registrar of Companies (ROC). This allows the company to issue more shares and raise additional funds.
By getting shareholder approval in a general meeting and filing the required forms with the ROC.
The minimum is ₹1 lakh, but companies may set a higher limit depending on their needs.
Yes, by following the procedure under the Companies Act, 2013 and filing the required forms.
MGT-14 is required if the Articles of Association are changed via a special resolution.
Yes, with shareholder approval and by following legal procedures.
By checking the AOA, passing necessary resolutions, and filing Form SH-7 with ROC.
The company’s promoters and directors decide this based on financial needs.
No, unless it formally increases its authorised capital first.
A private company can now have up to 200 shareholders under the current law.
₹1 lakh is the legal minimum for private companies.
By issuing shares to existing shareholders or opting for debt funding.
It gives a shareholder greater influence and voting power.
Yes, it applies to private firms regarding board powers like capital decisions.
Based on assets, earnings, and valuation methods like DCF or market approach.
When planning to issue more shares or raise funds for expansion.