Overview

For every business needs investment to operate in uninterrupted manner. Such investment is made in the form of Authorised capital by the Company. Businesses sets a maximum limit to invest and then the amount is invested in the form of share capital by subscribing to the shares of the Company. This amount is specified in the Memorandum of Association of every Company as “Capital Clause”.

Any Company that wants to increase investment in capital must alter its memorandum of association in provision of the Companies Act, 2013.

Definition under Companies Act, 2013

As per section 2(84) of the Act, ”Shares” means a share in the share capital of a company and includes stock.

As per section 2(8) of the Act, “Authorised share capital” or “Nominal Capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;

Reasons for increase in Authorised share capital

After incorporation, businesses experience ups and downs, and in response they plan for business growth or division. Companies that are performing well will typically increase investment in the company to meet working capital needs and to expand operations to new levels.

Procedure for increase in Authorised Capital

• Conduct Board Meeting to consider the increase in Authorised Capital of the Company.
• After assent of the board members, call for a general meeting for approval of members to alter capital clause inter alia alteration in Memorandum of Association
• Dispatch notices for calling an Extra Ordinary General Meeting (EGM)/ Annual General Meeting (AGM) to all the members in accordance with provisions section 101 of Companies Act,2013 read with secretarial standard 2 on General Meetings
• Accord approval of Members through ordinary resolution at Extra Ordinary General Meeting (EGM)/Annual General Meeting (AGM) for capital clause change and alteration in Memorandum of Association.
• File E form SH-7 to submit resolution with the Registrar of Companies.
• The Registrar shall register the alteration of the memorandum and after approval authorised capital will get increased and the same is reflected on the master data of the Company at MCA portal.

What is included in this

1. Preparation of documents;
2. Filing of E forms SH-7;
3. ROC Approval;
4. Laisioning with department;
5. 24/7 help to assist you;

FAQ’s

1. What is authorised share capital?

As per section 2(8) of the Act, “Authorised share capital” or “Nominal Capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;

2. Is it mandatory to alter Memorandum of Association in case of capital change?

Yes, Memorandum of Association is the primary document of the Company which specifically states the capital under “Capital Clause”. It is mandatory to alter MOA for changing authorised cpital of the Company.

3. What E forms are filed for capital clause change?

E form SH-7 is filed in case of increase in authorised capital of the Company.

4. Is there any restriction on increase in authorized capital?

Section 13 and section 61 of the Act deals with the alteration in Memorandum of Association. As per section 61 of the Act, to proceed for alteration, Company must have to check for the authority for the same in the article of associations. If article prohibits the Company to increase its authorised capital than Company is required to alter its Article of Association first to vest the authority to the Company.

5. Does board have powers to alter capital clause of the Company?

No, the power to alter the capital clause of the Company vests with the shareholder of the Company.