Increase Authorised Capital
Rs. 3847/- (All Inclusive)
Increase Authorised Capital of Private Limited Company
What is Authorised Capital and Paid Up Capital?
Authorised capital is also known as nominal capital. It is the maximum amount of share capital a company can issue. Capital clause of memorandum of association of a company contains the details of authorised capital of a company.
Paid up share capital is the aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company.
How much does it cost to increase Authorised Capital of Private Limited?
How to increase in authorised share capital?
A company limited by shares can increase its authorised share capital from time to time. For increase in authorized share capital following steps to be followed:
- Check the articles of association of the company for authorisation for increase in authorized share capital and incase it is not authorised by Articles of Association, amend the articles of association.
- Calling a board meeting and after discussing pass the resolution related to increase in authorised capital and alteration of capital clause of Memorandum of Association of the company and recommend the same to the shareholders of the company.
- Issue of Notice of general meeting.
- Pass resolutions related to increase in authorised capital and alteration of memorandum of association of the company.
- Filing of form MGT-14 and SH-7 with Registrar of Companies.
Issue and Allotment of shares
Issue of shares means the process of offering and allotting new shares either to the existing shareholders of the company or to a selected group of persons who have been identified by the Board of the company or employees of the company under an ESOP scheme. Private companies cannot issue shares to the public, however it can raise the funds in the form of share capital by issuing shares to its shareholders, selected group of persons through private placement or preferential allotment, employees and directors. There are many ways through which a private company can increase its paid up capital, some of them are listed below.
The followings are the ways of issuing the shares:
- Right Issue
- Private Placement
- Preferential allotment
- Conversion of loan into equity/preference shares
- Sweat Equity
FAQs on Authorised & Paid up Capital
Authorised Capital is the maximum amount of capital a company can raise by way of issuing shares. One has to check the capital clause of the memorandum of association of the company for checking the amount, whereas paid up capital is the capital issued and allotted by the company.
For increase in authorised capital one has to check the Articles of Association (AOA) of the company. In case no restrictions is mentioned in the AOA then a private company can increase its authorised capital. Steps for increase in authorised capital is as follows:
- Call and hold a Board Meeting.
- Pass the necessary resolutions and recommend the increase in capital to the shareholders
- Issue notice of general meeting
- Pass the resolutions related to alteration of Memorandum of Association and increase in authorised capital
- File the forms such as MGT-14 and SH-7 with the Registrar of Companies.
Form SH-7 is an electronic form filed for increase in authorised capital of the company.
Yes, payment of stamp duty is mandatory at the time of increase in authorised capital. The stamp duty depends upon the state in which the registered office address of the company is situated.
Authorised Capital is the maximum amount of share capital a company can raise by way of issue and allotment of shares. How much should be the authorised capital of a company is depends on the long funds requirements of the company, future business expansion plans etc. as for allotment of shares the company should have authorised capital.
No, at no point, the paid up share capital of the company cannot be more than its authorised share capital, as the authorized share capital of the company is the maximum amount up to which a company can issue and allot shares.
For increase in authorised capital, shareholders’ approval is mandatory in general meeting. The type of resolution i.e. special or ordinary depends on the Articles of Association of the Company.
A company can issue and allot shares under right issue without calling a shareholders meeting. However one must check the Articles of Association and Capital clause of the Memorandum of Association before going with right issue.
The company is required to call and hold a board meeting and pass necessary board resolutions related to issue and allotment of shares.