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Increase in Authorized Share Capital

Increase in Authorized Share Capital in India is a popular choice among entrepreneurs due to its benefits such as Increase in Authorized Share Capital, separate legal entity, and ease of raising capital. 

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Increase in Authorized Share Capital

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Overview of Increase in Authorized Share Capital in India.

Increasing authorized share capital is a process through which a company can raise additional funds by issuing more shares. It involves altering the company’s memorandum of association and obtaining approval from shareholders and regulatory authorities. In India, this process is governed by the Companies Act, 2013.

Requirements:

  1. Board approval: A resolution must be passed by the board of directors to propose the increase in authorized share capital.
  2. Shareholder approval: Shareholders must pass a special resolution approving the increase through a general meeting.
  3. Filing with regulatory authorities: The company needs to file Form SH-7 with the Registrar of Companies within 30 days of passing the resolution.

Benefits of Increase in Authorized Share Capital in India

  1. Access to additional funds: Allows the company to raise capital by issuing new shares.
  2. Enhanced financial flexibility: Provides flexibility to meet financial requirements and pursue growth opportunities.
  3. Improved market perception: Investors may view an increase in authorized capital positively, signaling growth prospects.
  4. Ability to attract investors: Increased authorized capital can make the company more attractive to potential investors or lenders.
  5. Facilitates future expansion: Provides the groundwork for future expansion and strategic initiatives.

How Register Helps in the Increase in Authorized Share Capital Process?

  1. Conduct a board meeting and pass a resolution to increase the authorized share capital.
  2. Call for an Extraordinary General Meeting (EGM) to obtain shareholder approval through a special resolution.
  3. File Form SH-7 with the Registrar of Companies along with required documents.
  4. Obtain approval from regulatory authorities.
  5. Amend the Memorandum of Association to reflect the increased authorized share capital.

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Documents Required for Increase in Authorized Share Capital in India

  1. Board resolution approving the increase in authorized share capital.
  2. Special resolution passed by shareholders.
  3. Altered Memorandum of Association (MoA) reflecting the increased authorized capital.
  4. Form SH-7 (filed with the Registrar of Companies).
  5. Updated statutory registers and records.

Faq - Company Registration

Companies often increase authorized share capital to facilitate future growth, expansion, or to raise additional funds for investment opportunities or to meet financial obligations.

Increasing authorized share capital doesn't directly dilute existing shareholders' ownership. However, if new shares are issued as a result of the increase, it can lead to dilution. Existing shareholders may have the option to purchase additional shares to maintain their ownership percentage.

Yes, as per the Companies Act, 2013, shareholder approval through a special resolution in a general meeting is mandatory for increasing authorized share capital.

The process involves obtaining board approval, convening an Extraordinary General Meeting (EGM) to seek shareholder approval, filing required forms with the Registrar of Companies, and obtaining regulatory approvals. The duration can vary depending on factors such as the company's compliance readiness and regulatory processing times.

Generally, there are no specific restrictions on the end-use of funds raised through the increase in authorized share capital. However, the company's board of directors must act in the best interests of the company and its shareholders, ensuring that the funds are utilized prudently and in accordance with applicable laws and regulations.

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