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Overview

Increase in Authorized Share Capital

Increase in Authorized Share Capital refers to the process of enhancing the maximum share capital a company is authorized to issue, as specified in its Memorandum of Association (MOA). This action is often undertaken to raise additional funds for expansion or new business activities. The process is governed by the Companies Act, 2013, and involves amending the MOA and filing necessary forms with the Registrar of Companies (ROC).

Authorized share capital represents the maximum limit of share capital that a company can issue to its shareholders. Increasing this limit allows a company to issue additional shares, making it a critical step for raising funds or onboarding new investors.

Important

1. Facilitates Fundraising : Enables the company to issue more shares for capital infusion.

2. Investor Attraction : Prepares the company for future equity investments.

3. Compliance : Ensures legal readiness for issuing shares within the authorized limit.

4. Business Expansion : Provides financial flexibility for growth initiatives.

5. Supports Strategic Goals : Helps align the company's financial structure with its objectives.

Applicability

1. Private Limited Companies : To raise capital through additional equity issuance.

2. Public Limited Companies : For issuing shares to the public or institutional investors.

3. Startups : For onboarding new investors during funding rounds.

4. Small and Medium Enterprises (SMEs) : For equity-based growth financing.

Key Compliance Requirements

1. Board and Shareholder Approval : Board resolution and shareholder consent through an ordinary resolution.

2. Amendment of MOA : Update the capital clause in the MOA to reflect the new authorized capital.

3. Filing with ROC : File Form SH-7 with the ROC along with necessary attachments.

4. Payment of Stamp Duty : Pay applicable stamp duty on the increased share capital as per state laws.

5. Update Statutory Registers : Reflect the increased share capital in the company's statutory registers.


Documents Required



Features

Features & Benefits of Increase in Authorized Share Capital

Legal Requirement
Mandatory for issuing shares beyond the existing authorized limit.
Prev Next
Board and Shareholder Oversight
Ensures transparency through board and general meetings.
Prev Next
Filing with ROC
Compliance through Form SH-7 filing is critical.
Prev Next
Amendment of MOA
Reflects the new authorized share capital in the company’s constitution.
Prev Next
Payment of Stamp Duty
Ensures compliance with state-specific stamp laws.
Prev Next

Increase in Authorized Share Capital

Supports Future Capital Needs
Prepares the company for funding rounds or equity issuance.
Prev Next
Fast Process
Typically completed within 1-2 months.
Prev Next
Scalable Capital Structure
Aligns the company's capital with growth objectives.
Prev Next
Transparent Documentation
Maintains clear records of shareholder and regulatory approvals.
Prev Next
Penalty for Non-Compliance
Avoids fines for delayed filing or improper procedures.
Prev Next


Comparison with Related Services

Feature Increase in Authorized Share Capital Change in Share Capital Share Allotment
Objective Raise maximum share capital Modify share capital structure Issue shares to members
Regulatory Body MCA, ROC MCA, ROC MCA, ROC
Filing Frequency One-time Event-based Event-based
Forms Required SH-7 SH-7, PAS-3 PAS-3
Penalty for Non-Compliance High High High


Frequently Asked Questions

What is authorized share capital?

Authorized share capital is the maximum amount of share capital a company is legally allowed to issue, as specified in its Memorandum of Association (MOA).

What is the difference between authorized and paid-up share capital?

Authorized share capital is the maximum limit, while paid-up share capital is the actual amount subscribed and paid by shareholders.

Is shareholder approval mandatory for increasing authorized share capital?

Yes, an ordinary resolution must be passed at a general meeting.

What is Form SH-7?

Form SH-7 is filed with the ROC to report the increase in authorized share capital.

How long does it take to increase authorized share capital?

The process typically takes 30-45 days, depending on approvals and filings.

What happens if SH-7 is not filed on time?

Companies may face penalties of ₹500 per day of delay, along with additional fines.

Authorized Share Capital

Overview

Increase in Authorized Share Capital

Increase in Authorized Share Capital refers to the process of enhancing the maximum share capital a company is authorized to issue, as specified in its Memorandum of Association (MOA). This action is often undertaken to raise additional funds for expansion or new business activities. The process is governed by the Companies Act, 2013, and involves amending the MOA and filing necessary forms with the Registrar of Companies (ROC).

Authorized share capital represents the maximum limit of share capital that a company can issue to its shareholders. Increasing this limit allows a company to issue additional shares, making it a critical step for raising funds or onboarding new investors.

Important

1. Facilitates Fundraising : Enables the company to issue more shares for capital infusion.

2. Investor Attraction : Prepares the company for future equity investments.

3. Compliance : Ensures legal readiness for issuing shares within the authorized limit.

4. Business Expansion : Provides financial flexibility for growth initiatives.

5. Supports Strategic Goals : Helps align the company's financial structure with its objectives.

Applicability

1. Private Limited Companies : To raise capital through additional equity issuance.

2. Public Limited Companies : For issuing shares to the public or institutional investors.

3. Startups : For onboarding new investors during funding rounds.

4. Small and Medium Enterprises (SMEs) : For equity-based growth financing.

Key Compliance Requirements

1. Board and Shareholder Approval : Board resolution and shareholder consent through an ordinary resolution.

2. Amendment of MOA : Update the capital clause in the MOA to reflect the new authorized capital.

3. Filing with ROC : File Form SH-7 with the ROC along with necessary attachments.

4. Payment of Stamp Duty : Pay applicable stamp duty on the increased share capital as per state laws.

5. Update Statutory Registers : Reflect the increased share capital in the company's statutory registers.


Documents Required



Features

Features & Benefits of Increase in Authorized Share Capital

Legal Requirement

Mandatory for issuing shares beyond the existing authorized limit.

Board and Shareholder Oversight

Ensures transparency through board and general meetings.

Filing with ROC

Compliance through Form SH-7 filing is critical.

Amendment of MOA

Reflects the new authorized share capital in the company’s constitution.

Payment of Stamp Duty

Ensures compliance with state-specific stamp laws.

Supports Future Capital Needs

Prepares the company for funding rounds or equity issuance.

Fast Process

Typically completed within 1-2 months.

Scalable Capital Structure

Aligns the company's capital with growth objectives.

Transparent Documentation

Maintains clear records of shareholder and regulatory approvals.

Penalty for Non-Compliance

Avoids fines for delayed filing or improper procedures.



Comparison with Related Services

Feature Increase in Authorized Share Capital Change in Share Capital Share Allotment
Objective Raise maximum share capital Modify share capital structure Issue shares to members
Regulatory Body MCA, ROC MCA, ROC MCA, ROC
Filing Frequency One-time Event-based Event-based
Forms Required SH-7 SH-7, PAS-3 PAS-3
Penalty for Non-Compliance High High High


Frequently Asked Questions

What is authorized share capital?

Authorized share capital is the maximum amount of share capital a company is legally allowed to issue, as specified in its Memorandum of Association (MOA).

What is the difference between authorized and paid-up share capital?

Authorized share capital is the maximum limit, while paid-up share capital is the actual amount subscribed and paid by shareholders.

Is shareholder approval mandatory for increasing authorized share capital?

Yes, an ordinary resolution must be passed at a general meeting.

What is Form SH-7?

Form SH-7 is filed with the ROC to report the increase in authorized share capital.

How long does it take to increase authorized share capital?

The process typically takes 30-45 days, depending on approvals and filings.

What happens if SH-7 is not filed on time?

Companies may face penalties of ₹500 per day of delay, along with additional fines.

Related Services

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