Change In Share Capital
Boost investor confidence when buying shares in the company because they are confident there is no lack of access to funds, so its required to increase your capital as company grows.
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Why we need to increase the Authorized share Capital?
Before issuing new equity shares and before raising paid-up capital, the company could need to expand its authorized share capital. Paid-up capital is never allowed to surpass the capital authorized by the firm. Therefore, if a firm wishes to expand its paid-up capital, it must first verify that it has the necessary authorized capital and then raise that capital as needed.
What procedure we need to follow to change the Authorized Share Capital of a company?
A company's authorized share capital may be increased at any time, subject to the Companies Act of 2013's Section 61 (read in conjunction with Sections 13 and 14).
Step 1: Prior to increasing authorized share capital, confirm that the company's articles permit the increase in authorized capital. According to Section 14 of the Companies Act of 2013, if the Articles do not permit an increase, they must be amended to permit it before moving further.
Step 2: The decision to hold an EGM to debate and vote on the issue of raising authorized share capital is made during a board meeting.
What happens if the application for an increase in authorized capital is not filed?
Section 117(2) states that the company will be fined not less than five lakh rupees but not less than twenty-five lakh rupees, and each officer of the company who is in default will be fined not less than one lakh rupees but not more than five lakh rupees, if the company does not file the resolution or the agreement under sub-section (1) before the end of the period specified under Section 403 with additional fee.
Process Involved
Step-1
Calling of Board Meeting Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors.
Step-2
Resolution to get in-principal approval of Directors for Increase in authorised share Capital.
Step-3
Holding Extra-ordinary General meeting (EGM) to get approval of shareholders, by way of Ordinary Resolution, for amendment in authorized share Capital clause of Memorandum of Association.
Step-4
Pass the necessary Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, for increase in authorize share capital of the Company .
Step-5
File form SH-7 within 30 days of passing of Ordinary Resolution with the concerned Registrar of Companies, with prescribed fees and along with following attachments as desired by section 64
Step-6
After Approval of Form by ROC, Authorized capital will be Increased
