INTRODUCTION:-
As per Section 2(8) of the Companies Act, 2013, an “Authorised Capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company. In simple words, we can say that authorise capital is such a limit upto which a company can raise it’s share capital.
The Authorized Capital limit is specified in the Memorandum of Association under the Capital Clause. A Private Company have to follow the necessary steps to increase the authorized capital limit in order to issue more shares when existing authorised capital get exhausted.
As per section 61 of the Companies act, 2013 a Private Company having a share capital may, by passing an ordinary resolution in Extra-Ordinary general meeting, alter the capital clause of its Memorandum of Association; provided authority to alter the same is given to it by its Articles of Associations.
Procedure to increase Authorized Share Capital in a Private Company:-
1. Firstly, the Company has to check and verify the Article of Association (AOA) to make sure that there is a provision related to the expansion of the authorized Share capital. If there is no such provision in AOA, then appropriate steps required to be taken to amend its Articles.
2. Convene a Board Meeting and pass the necessary Board resolution for:-
– Consideration and approval for the increase in Authorized Share Capital.
- Alteration to the Capital Clause of Memorandum of Association (MOA).
- Approval to draft notice of Extra Ordinary General Meeting along with explanatory statement and other necessary documents as per Section 102 of the Companies Act, 2013.
(Refer Secretarial Standard 1 for the detailed process to convene Board Meeting in a Company)
3. Record the minutes of the Board Meeting so finalized by the Directors within 30 days from the date of conclusion of the meeting. The Chairman shall initial each page of the Minutes and sign the last page and append to such signature the date on which he has signed the Minutes.
4. Notice of Extra- Ordinary General Meeting shall be given at least clear 21 days before the actual date of Extra- Ordinary General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share Capital of the company giving a right to vote at such a meeting in accordance with Section 101.
5. Hold the Extra Ordinary General Meeting on the fixed day and pass Ordinary Resolution for increase in Authorized Share Capital.
(Refer Secretarial Standard 2 for the detailed process to convene Extra Ordinary General Meeting)
6. Make relevant changes in the Memorandum of Association (MOA) of the Company.
7. Record the minutes of Extra Ordinary General Meeting, get them signed and compile accordingly.
8. File a notice of alteration of Share Capital with the Registrar in E-Form SH-7along with the prescribed fee and e-stamp duty and with the following documents:-
1. Certified True Copy of the Ordinary Resolution.
2. Copy of altered Memorandum of Association (MOA)
3. Extra-Ordinary General Meeting’s notice.
4. Any other document, as may be required.
Every Alteration in the Memorandum of Association (MOA) of the Company shall be noted in every copy of the same.
Once the authorized share capital is increased, the Company may proceed with the process of increasing paid-up share capital by issuing the fresh shares.
*****
Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.
Author Bio
