Change in Authorized capital/paid up capital

change in authorized capital

TYPE OF SHARE CAPITAL

*Authorised capital: It is the maximum amount of capital a company may raise.

*Issued Capital: It is that part of authorised capital, which is issued to raise capital.

*Subscribed Capital: It is that part of issued capital, which is subscribed to be paid by the shareholders.

*Paid-up Capital: It is that part of capital, which is subscribed and paid to company by the shareholders.

Authorised Share Capital is the maximum amount of the capital for which shares can be issued by the Company to shareholders, it is the capital mentioned in the MOA of the Company under heading of ‘Capital Clause.As per Section 2(8) of the Companies Act, 2013 “Authorised capital or Nominal Capital” means such capital as is authorized by the memorandum of a company to be maximum amount of share capital of the company.

Procedure for Increase in Authorised capital of Company under Companies Act, 2013

1. Checking Article of Association:

AOA Must be authorised for increase the share capital. Where no such authority is provided for in the AOA of Company, then the provisions in AOA has to be amended (Section 14 of Companies Act,2013) to include provisions authorising the company to increase its share capital , which can be done by passing of special resolution.

2.Calling and Holding Board of Directors for Board Meeting:

A board meeting is required to be called wherein it is decided that an AGM / EGM is to be held to discuss on the matter of raising authorized share capital.
 Once the date, place, and time of the AGM/EGM are agreed upon by the Board, a notice for the same is issued to every member/shareholder, director, auditor of the company, who will thereafter vote upon the matter of raising authorized share capital, as per Section 101 of the Companies Act 2013.

3. Holding of Extraordinary General Meeting (EGM)
Holding Extraordinary General Meeting of the Members as on day,date,time and venue as was decided  by the Board of Directors in the board meeting and pass the resolution for increase in authorise capital by passing ordinary resolution.

4.Forms to be filled with ROC:
Within 30 days of the passing of Ordinary Resolution, Form SH-7 must be filed with the concerned Registrar of Companies (ROC) along with the necessary fees and attachments as prescribed by Section 61 and 64. 

Following documents are required to be submitted along with e-form SH-7-

*Board Resolution for increase in Authorised Share Capital

*Board resolution for modification in the capital clause of MOA

*Notice of Shareholders meeting along with the explanatory statement

*Shorter Consent received from the shareholders in case the meeting is held at shorter notice.

*Shareholders’ Resolution that has been passed in the AGM /EGM.

*Altered copy of MOA and AOA.

DOCUMENTS REQUIRED
Digital Signature Certificate of one of authorised director to be provided.
A copy of latest amended MoA and AoA of the company.
Certificate of Incorporation of company to be provided.
Copy of PAN card of the company to be provided.

Things needs to be taken care at the time of filing form SH-7

**Before starting the process of Increase in authorized the Company needs to check whether the AOA is containing article related to increase in capital.

**Delay in filing form SH-7 will attract additional fees which will vary from 2.5% to 3% depending upon the period of delay in filing.
**Form MGT-14 is only required to be filed in case of special resolution passed for the alteration of the AOA.

INCREASE IN AUTHORIZED SHARE CAPITAL

For Increase Paid-up capital you need to issue new shares and allocat them in the executive gathering through a board determination. Return of distribution 
is required to be submitted u/s 75 by recording structure 2 with concerned Registrar of Company.

Methods of increase:-
1.Right issue
2.Fresh issue throught private palcement
3.Preferencial allotment
4.Sweat equity shares
5.Conversion of loan/ebenture/Preferancial shares into Equity shares
6.Issue of Bonus shares

DOCUMENTS REQUIRED
Articles of association (AOA)
List of Existing shareholders.
Details of proposed shareholder
Proposed Paid up share capital.
Other documents, if required.

A Private Limited Company may need to expand its Authorised capital before issuing new value shares and expanding paid-up capital. Authorised capital is the aggregate estimation of offers an organization can issue, while paid-up capital is the aggregate estimation of offers the organization has issued. Paid-up capital can never surpass Authorised capital. Henceforth, if an organization having an approved capital or Authorised capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs might want to enlist new investors, it can do as such either by:

PROCESS
CHECK WHETHER THE COMPANY PRIMA-FACIE AUTHORISED
Check Whether The Company Prima-Facie Authorised By The AOA To Increase The Share Capital If It Does Not Authorise The Proceedings Are To Be 
Completed With The Objective Of Altering Them.

TO CONVENE THE BOARD MEETING
To Convene The Board Meeting For Enabling The Board To Call For Extraordinary General Meeting (If Not Passed At Annual General Meeting) To Get Approval From The Shareholders For Increasing The Authorised Share Capital.

CALL FOR AN EXTRAORDINARY GENERAL MEETING
Call For An EGM Of The Shareholders Of The Company By Sending A Notice With Clear Agenda, Explanatory Statements And The Resolutions To Be 
Passed To Alter The MOA And AOA Which Are To Be Altered For The Purpose Of Increasing The Authorised Share Capital.

PASS THE RESOLUTIONS FOR INCREASING THE AUTHORISED
Pass The Resolutions For Increasing The Authorised Share Capital Of The Company And Corresponding Alterations In MOA And AOA By Special Resolution.

AUTHORISE THE BOARD
Authorise The Board To File Necessary Forms And Resolutions With ROC Having Jurisdiction.

FILING THE E-FORM
Filing The E-Form SH7 With Roc By Paying The Requisite Fee.

** Paid-up Share Capital can be equal or less than the authorised share capital but cannot be more than authorised share capital.
** A company can be incorporated without Authorise share capital.

DOCUMENTS REQUIRED
Articles of association (AOA)
List of Existing shareholders.
Details of proposed shareholder
Proposed Paid up share capital.
Other documents, if required.