In the Companies Act 2013, the procedure for the increase in the Authorised share capital has been governed in sections 61 and 64 of the Companies Act 2013. In any case related with the share capital in the process of increasing the paid-up share capital of the company by issuing the fresh equity shares, the first step that needs to be taken into consideration is the Increase in the Authorised share capital of the company. The procedure for the increase in the Authorised share capital is as follows:

What is Authorised Capital?

The authorized share capital is the maximum amount of share capital that a company can issue to its members/ shareholders. Generally, the companies registered with a small authorized capital increase their capital as per the requirements of the Company.As per the provisions of Section 61 Companies Act 2013 the companies can increase its authorised share capital with certain procedure read with Section 13 and 14 of the act which governs the alterations to the Memorandum of Association and Articles of Association of the company.

Procedure for increase in Authorized Capital:

1- Approval within Articles of Association

First check before starting the process of increase in the Authorised Capital is to check whether any provision in Articles of Association regarding increase in capital. If there is no provision in Article of Association for Increase in Authorised Capital, the Articles of Association of the Company will have to be altered.

Procedure for alteration of the Articles of Association

For alteration of Articles of Association, the Company needs to take approval of Shareholders by passing special resolution in the General Meeting. The General Meeting can be Annual General Meeting or Extraordinary General Meeting of the Company.

The following Documents will be required for altering Articles of Association of the Company-

1. Notice of Annual General Meeting / Extraordinary General Meeting along with Explanatory Statement

2. Shorter Consent received from the members of the company if the Annual General Meeting / Extraordinary General Meeting is held at shorter notice.

3. Copy of Shareholders Resolution

4. Altered Articles of Association

The Company is required to file form MGT-14 within 30 days from the date of passing Shareholders resolution.

Things needs to be taken care at the time of filing form MGT-14

1. The form MGT-14 is required to be filed within 30 days from the date of passing of shareholders resolution.

2. For calculation of 30 days the day of passing of resolution will also be taken in to account.

3. Delay in filing form up to 300 days will attract additional fees but delay from and beyond 300 days will attract provisions related to condonation of delay under Section 460 and the Company has to condone the delay by making an application to the Central Government in form CG-1 before filing form MGT-14.

4. 21 Clear days notice is required to be given to the shareholders before calling Annual General Meeting / Extraordinary General Meeting, if not, consent for shorter notice of the shareholders required to be taken.

2. Board meeting to consider the matter and notice of AGM/EGM

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. Hold Extraordinary General Meeting

The Ordinary Resolution under section 61(1) (a) of the Companies Act, 2013, is then passed to increase the Authorized Share Capital of the Company in the meeting.

4. ROC Form and documents

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-

1. Board Resolution for increase in Authorised Share Capital

2. Board resolution for modification in the capital clause of Memorandum of Association

3. Notice of Shareholders meeting along with the explanatory statement

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

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

6. Altered copy of Memorandum of Association and Articles of Association.

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

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

2. 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.

Related sections:Section 61 and Section 64 of the Companies Act, 2013 deals with increase in Authorised Capital of the Company.

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