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Every company registered under the Companies Act, 2013 is authorized to issue shares up to a specific limit, which is mentioned in its Memorandum of Association (MoA)—this is called the Authorised Share Capital of the company. Now, sometimes the business needs more money or wants to expand operations or bring new investors on board, but the authorised capital set during incorporation is not enough. In such cases, the company needs to increase its authorised capital first, and only then can it issue new shares legally.
The Increase in Authorised Capital is basically the legal process of raising the maximum limit of share capital that a company can issue to its shareholders. Without this step, a company cannot raise fresh funds through equity, even if it has willing investors.
This process is very important because it gives companies the flexibility to grow, expand operations, or onboard new shareholders when needed. Whether it's a startup looking for new investments or an established company planning for expansion, increasing authorised capital is a must when the limit set earlier is no longer enough.
Once the authorised capital is increased, a company becomes eligible to issue more shares and raise funds from existing or new investors
Businesses planning to expand their operations or services often need large funds, and increasing the authorised capital helps in fulfilling those financial needs.
Investors prefer companies that have the flexibility to issue additional shares, especially in funding rounds.
Having a higher authorised capital in place means the company can act quickly when a new opportunity or partnership arises.
A company with higher authorised capital is seen as more credible and capable in the eyes of lenders, banks, and investors.
Companies can issue bonus shares to existing shareholders only if they have sufficient authorised capital.
If a company plans to offer rights shares to its existing shareholders, it needs adequate authorised capital beforehand.
Without increasing authorised capital, any share issuance beyond the existing limit is invalid under law.
It helps companies to structure their capital more efficiently based on future plans and strategies.
Authorised capital is the maximum capital a company is allowed to raise through issuing shares as mentioned in its MoA. Paid-up capital is the actual amount received by the company from shareholders against the issued shares. You can only increase paid-up capital up to the limit of authorised capital.
You should consider increasing the authorised capital when your company plans to raise more funds through equity, issue bonus shares, or bring in new shareholders. Without increasing this limit, you cannot issue additional shares legally.
Yes, it can be increased anytime after incorporation. There is no restriction on when it can be done, as long as the proper legal process is followed and the required approvals are obtained.
No central government approval is needed. But you must get approval from the company's shareholders through a resolution and file the necessary forms with the Registrar of Companies.
The main form is Form SH-7, and it should be filed along with the altered Memorandum of Association (MoA), Articles of Association (AoA), board and shareholder resolutions, and applicable fee.
On average, the entire process of increasing authorised capital takes about 7–10 working days after submission of all documents and resolutions.
Yes, stamp duty is applicable on the increase of authorised capital and varies from state to state. It has to be paid during the filing of the SH-7 form.
Yes, the MoA and AoA must be altered to reflect the new authorised capital amount. Without these updates, your request may be rejected by the RoC.
Absolutely. Startups often need to raise funds in rounds, and increasing authorised capital allows them to issue new shares to investors during those rounds.
Yes, it's highly recommended to take help from a professional CA or legal expert because the process involves legal drafting, filing compliance forms, and dealing with government portals like MCA, where accuracy is crucial.
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