Increasing the authorized capital of a company in India is a strategic move to raise more funds, expand operations, or attract investors. As businesses grow, their capital needs evolve, and adjusting the authorized capital allows a company to issue more shares without altering its existing structure.
In this guide, we’ll walk you through the entire process of increasing the authorized capital of your company in India, the legal requirements, documents needed, and the steps involved.

What is Authorized Capital?

Authorized capital refers to the maximum amount of capital that a company is allowed to raise through the issuance of shares as specified in its Memorandum of Association (MoA). While this amount is not the actual capital the company holds, it sets the upper limit for the number of shares that can be issued.
Increasing authorized capital allows a company to issue additional shares to raise funds, provide equity to new investors, or meet other financial requirements.

Why Increase Authorized Capital?

1.    Expansion of Business: As your company grows, you may need more capital for investment, infrastructure, or hiring.
2.    Attracting Investors: Issuing more shares may help bring in new investors, increasing your company’s capital base.
3.    Compliance with Regulatory Requirements: Certain business operations or new funding rounds may require an increase in authorized capital.

Steps to Increase Authorized Capital of a Company in India

    1.    Hold a Board Meeting 

•  Call a Board of Directors meeting to discuss the proposal for increasing the authorized capital.
• The Board must approve the resolution for the increase in capital.
  2.    Draft a Special Resolution
• After the Board’s approval, a special resolution must be passed by the shareholders in a general meeting.
• The special resolution should specify the increase in authorized capital and the amendments to the Memorandum of Association (MoA) and Articles of Association (AoA).
  3.    Amend the Memorandum of Association (MoA)
• The authorized capital amount mentioned in the MoA needs to be increased and the revised capital figure must be filed with the Registrar of Companies (RoC).
  4.    Filing with the Registrar of Companies (RoC)
• File the special resolution and the amended MoA with the RoC.
• Submit forms MGT-14 (for special resolutions) and SH-7 (for alteration of the authorized capital) along with the necessary fees.
  5.    Payment of Fees
• The company must pay the required fees for the increase in capital, which is based on the increased authorized capital.
  6.    Approval from RoC
• Once the documents are submitted, the RoC will review the application. If everything is in order, the RoC will approve the increase in authorized capital and issue a certificate of incorporation.
  7.    Update the Company’s Records
• After approval, update your company’s MoA and AoA to reflect the new authorized capital. Keep all necessary records for future reference.

Documents Required to Increase Authorized Capital

1.    Board Resolution: Resolution passed by the Board of Directors approving the increase.
2.    Special Resolution: Resolution passed by shareholders in the General Meeting.
3.    Amended MoA and AoA: Updated Memorandum and Articles of Association.
4.    Form MGT-14: Filed with the RoC for the special resolution.
5.    Form SH-7: For the alteration in the capital structure.
6.    Bank Draft: Payment of the requisite fee for filing with the RoC.
7.    Other Necessary Forms/Certificates: Depending on the company type and other specific requirements.

Key Points to Remember

•    Board Approval : The increase must be approved by the Board of Directors before seeking shareholder approval.
•    Special Resolution: A special resolution requires a 75% majority vote in the general meeting.
•    Filing Deadlines: Ensure all forms are submitted to the RoC within 30 days from the date of the special resolution.
•    Capital Structure: The authorized capital is the maximum limit. The company need not issue all the authorized shares at once.

Common Questions About Increasing Authorized Capital

1.    Can a company increase its authorized capital multiple times? Yes, a company can increase its authorized capital as many times as needed, but each increase must follow the legal procedures.
2.    Is there a limit to how much authorized capital can be increased? There is no specific limit to the increase in authorized capital, but the company must comply with the applicable laws and the requirements of its shareholders and investors.
3.    Can the increase in capital happen without shareholder approval? No, shareholder approval is mandatory in the form of a special resolution.
4.    What happens after the authorized capital is increased? Once authorized capital is increased, the company can issue shares up to the new authorized capital limit.

Conclusion

Increasing the authorized capital of your company in India is a straightforward process, but it must be carried out in compliance with the relevant legal procedures. Whether you’re raising funds for expansion or planning a new investment round, understanding the steps and requirements is essential for a smooth and successful increase in capital.
If you're planning to increase your company’s authorized capital, consider consulting with legal professionals to ensure all formalities are completed correctly. By following these steps, your company can unlock new growth opportunities and attract investors with ease.

Call to Action : If you need assistance with increasing your authorized capital, contact our team of experts who specialize in corporate law and compliance. Let us guide you through every step of the process!