CS Ankur Garg

As per my understanding procedure for Increase in Authorize share Capital is one of the most frequently searched topics by professionals. An attempt has been made from my side to unlock the provisions of Companies Act, 2013 related to Increase in Authorize share Capital along with requisite secretarial practice w.r.t. to sample Board and Shareholders’ resolutions.

Under Companies Act, 2013, the process of Increase in Authorise Capital is governed by Section 61 read with section 13 and 64 of Companies Act, 2013. Procedure in this regard is given below:

Procedure for Increase in Authorize share Capital

1. Authorisation in Article is must for Increase: For Increase in Authorise Share Capital, the company has to make sure that its Articles of Association contain a provision authorising it to increase its authorized share capital. Reason being Section 61 of the Companies Act, 2013, mandates that for increasing the Authorised share capital, authorization in Articles of Association is a pre-condition.

In other words Company has to make sure that its Articles of Association contain a provision authorising it to increase its authorised share capital.

So first check whether there is enabling provision in the Articles of Association regarding increase in authorised share capital.

If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the Authorised share capital of the Company.

2. 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. Main agenda for this Board meeting would be:

a. To Get in-principal approval of Directors for Increase in authorised share Capital;

b. Fix date, time and place for holding Extra-ordinary General meeting (EGM) to get approval of shareholders, by way of Ordinary Resolution, for amendment in authorised share Capital clause of Memorandum of Association. This amendment in authorised share Capital clause of Memorandum of Association shall be in accordance with the requirement of section 61 of the Companies Act, 2013;

c. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;

d. To authorise the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the board under clause 2(c) mentioned above.

3. Issue Notice of the Extra-ordinary General meeting (EGM) to all Members, Directors and the Auditors of the company in accordance with the provisions of Section 101 of the Companies Act, 2013;

4. Holding of General Meeting: Hold the Extra-ordinary General meeting (EGM) on due date and pass the necessary Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, for increase in authorize share capital of the Company.

5. ROC Form filing: 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:

a. Notice of EGM;

b. Certified True copy of Ordinary Resolution;

c. Altered Memorandum of Association.

6. Concerned Registrar of Companies (ROC) will check the E-forms and attached documents and will approve the increase in authorize share capital.

Notice to be given to Registrar for alteration of share capital.

As per section 64 of the Companies Act, 2013, where a company alters its share capital for increase in authorised share capital in accordance with sub-section (1) of section 61, the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of such increase along with a copy of altered Memorandum.

No need to pass Special Resolution for increase in authorised share capital

Some professionals are of the view that for increase in authorised share capital Special Resolution is to be passed, since amendment in Memorandum of Association can be done by way of passing Special Resolution under section 13 of the Companies Act, 2013.

Kindly appreciate amendment in Memorandum of Association by way of passing Special Resolution is required only when there is a change in particular clause of MOA like alteration in name clause or alteration in registered office clause, as envisaged in Section 13.

Amendment in capital clause of Memorandum of Association for the purpose of increase in authorised share capital is exclusively governed by Section 61of the Companies Act, 2013 and section 61 is silent about the nature of shareholders’ resolution. So in the above scenario an Ordinary Resolution would be enough for increase in authorised share capital.

SECRETARIAL PRACTICE / DRAFTING

Sample Board Resolution for:

A. Increase in Authorised Share Capital

“RESOLVED THAT pursuant to the provisions of Section 61 and 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.

B. Alteration in the Capital Clause of Memorandum of Association

“RESOLVED THAT pursuant to the provisions of Section 13, 61 and 64 and other applicable provisions of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed thereunder, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, for substituting Clause V of the Memorandum of Association of the Company with the following clause.

V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”

Sample Shareholders’ Resolution to be passed in the General Meeting:

a. Increase in Authorised Share Capital

SPECIAL BUSINESS

1. To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT pursuant to the provisions of Section 61 read with Section 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the members of the Company be and is hereby accorded to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.

RESOLVED FURTHER THAT the Memorandum of Association of the Company be altered in the following manner i.e. existing Clause V of the Memorandum of Association be deleted and the same be substituted with the following new clause as Clause V:

V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”

RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board of Directors of the Company (hereinafter referred to as “Board” which term shall include a Committee thereof authorized for the purpose) be and is hereby authorized to take all such steps and actions and give such directions as may be in its absolute discretion deemed necessary and to settle any question that may arise in this regard, without being required to seek any further consent or approval of the shareholders or otherwise and that the shareholders shall be deemed to have given their approval thereto expressly by the authority of this resolution.”

Disclaimer: This write up is intended to start academic discussion on few significant interpretations under Companies Act, 2013. It is not intended to be a professional advice and should not be relied upon for real time professional facts. Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.

I am very hopeful that this write up would be of some help to understand the concepts in new Companies Act, 2013.

(CS Ankur Garg – Connect through Facebook )

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25 responses to “Procedure for Increase in Authorise Capital under Companies Act, 2013”

  1. Sagar Kapoor says:

    Whether section 61, 64 is applicable for private company?, If Not then what is the actual procedure for increase authorized share capital for private limited.

  2. Uthappa P B says:

    Respected Sir,
    Can we increase the authorized capital for predated . Kindly advise

  3. avinash says:

    thank you Mr.garg.. Really appreciate your interpretation…

  4. Anshul Jain says:

    If you have increased the authorized capital of section 8 company then can u please help me with the procedure to do that. Kindly mail me at anshuljn44@gmail.com

  5. Ankur Rastogi says:

    is it necessary to get the MOA printed again only when the share capital clause is altered or the old MOA will do the work. Company is incorporated as per Companies Act 2013

  6. VISHAL SWAIKA says:

    can i get the steps and procedure for the increase of paid up share capital of a section -8 company under the provisions of the companies act, 2013, the class of the company is public company

  7. Gireesh says:

    Hi sir,
    We are a healthcare company having HO in Delhi and existing authorised capital is Rs. 1.5Cr. we want to increase our authorised capital by 1.5cr (now the Authorised capital will be 3cr). what is ROC/MCA fee for the same.

  8. JOY JOSEPH says:

    Sir
    I have a doubt regarding increasing authorised capital. I have 15 shares in a co operative society from its starting time 1965 of Rs.10 per share.The society functions well. Now the Society decided that its basic share price increase to INR 100 (ie.Rs 10 to Rs 100) So They demanded I again pay INR 90 for each shares. Other wise my old shares will be removed to other income of the society ie. forfieted .

    Sir is it right? Please give an advice to take legal action against this Society.
    Joy Joseph
    Kottayam
    Kerala
    Please Reply

  9. Rohit says:

    Hello Sir, I have a Question regarding company , a company hired me as director with 40%share terms.i have joined company in feb 2014. but still i unable to get any share amount in company balance sheet.that company has existing fixed assets and existing 2 directors. i have doubt regarding that is i have share on that company or not.plz reply

  10. BHAVNA GALLANI says:

    DEAR SIR,

    I have a doubt regarding increasing authorised capital.Can a Company accept an application money before increasing its authorised capital? Firstly accept application money then within 60 days increase authorise capital n then allot shares. Is it Possible?? If yes under which provision of the Companies Act, 2013.

    Thanks

  11. sachin says:

    Sir, A very useful article. I have a query, can we a 100% subsidiary of a foreign company get the increased capital remitted into our account by our parent and then use the money for paying ROC fee for increase in authorized capital?

    Thanks.

  12. sachin says:

    Dear Mr. Garg, Thanks for a wonderful article. I have a query. We are a 100% subsidiary of a foreign company. Can we get the capital in our bank account remitted from our parent and then use it to pay ROC fees for increase in authorised capital? How else can we pay such high fees otherwise?

    Thanks,

    Sachin

  13. Gunjan says:

    Sir i have a query regarding penalty or fine as the case may be in case of allotment of shares under private placement , becoz i m not following the complete procedure for allotment , indeed i m directly filing PAS 3 , so what will be the consequences ???? Reply ASAP

  14. KAVITA SINGH says:

    After filing SH7 of pvt ltd, i got resubmission mail stating that MOA Clause V was not certified by the company and also stamp not affixed and DIN not mention. Can you plz guide me for altered MOA Clause V so that i can resolve my problem.
    Thank You

  15. KAVITA SINGH says:

    After filing SH7 of pvt ltd, i got resubmission mail stating that MOA Clause V was not certified by the company and also stamp not affixed and DIN not mention.
    Can you plz guide me for altered MOA Clause V so that i can resolve my problem.

  16. PRAFUL says:

    For alteration of AOA for increasing authorised capital special resolution required or ordinary bcz Section 14 is silent on nature of resolution.

  17. Aftab says:

    Dear sir,

    if the authorized capital increased, what is the value of new issued stocks.

    if i was not wrong the book value per stock of company also also decreases and Also EPS ( Earning Per Share)also decreases.

    IS any indication that we got to know that a particular company increasing its Authorised capital before increase. since i want to be long term invester it effects my EPS.

  18. sanjeev pal says:

    Dear sir,

    Can I allot share without having authorised capital by passing resolution in EGM.

  19. sanjeev pal says:

    Dear sir,

    Can I allot share without having authorised capital by passing resolution.

  20. Dolly says:

    Dear

    Please suggest if in Form SH-7 while increasing authorised share capital i have by mistakenly write the same increased amount in issued as well as paid up share capital without doing any allotment.
    Please advise how it will be rectify.

  21. Binal Shah says:

    For change in allotment of shares, PAS-3 has to be passed in case of increase in authorized and paid up share capital?

  22. BHARAT AGARWAL says:

    If the filing of forms with ROC delayed then what would be taken as date of increase in share capital. Whether date of resolution passed in General Meeting or the date when the forms were filed with the ROC.

  23. CA Alpesh Shah says:

    Dear Sir,

    We have increase the authorised capital & Paid up Capital as per the above article and We got approval also for the same, Now whether we need to file PAS-3 for allotment of shares even though we had already increased paid up capital in form SH-7 ??

    We have Private Company so we need to allot the share in Private Placement so please share the information regarding this.

    When we are going to file the PAS-3 their is information of private placement and for that should we need to file the form GNL-2 also??? (For Private Placement offer )

    Thanks.

  24. Marie says:

    Hi Mr. Ankur, I have a doubt on increasing authorised share capital. Already we have Rs.10 Face value shares. Now planning to increase our share capital. can we increase our face value to Rs.20 for the increase in authorise share capital? Is it correct way of doing it?

  25. CA. Mohsin Shaikh says:

    It is very well presented

    Impressive

    Thanks

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