Authorized capital can be increased by following necessary steps as required by Companies Act, 2013 read with Companies (Share Capital and Debentures) Rules, 2014. In this Article, we shall discuss procedure for increasing authorized share capital in detail.
Every Company irrespective of size, type of business, category of business etc will have its share capital classified under various types in the financial statement.
For every company, the capital structure would be broadly divided into two parts:
1. “Authorized share capital”;and
2. “Paid up share capital”.
Authorized share capital is the maximum amount of the capital for which shares can be issued by the Company to shareholders.
The Authorized capital is mentioned in the Memorandum of Association of the Company under heading of “Capital Clause”.
The Authorized capital can be increased at any time in future by following necessary steps as required by law.
Relevant Provisions: Section 61(1)(a), 64 of the Companies Act 2013 read with rule 15 of Companies (Share Capital and Debentures) Rules, 2014.
In this Article, we shall discuss the procedure for increasing the authorized share capital in detail:
- Check Articles of Association: The AOA must authorize the increase in authorized share capital. If there is no specific provision in the articles, then we have to alter AOA by passing Special Resolution in the General Meeting and filing of MGT-14 with the Registrar of Companies.
- Calling of Board Meeting: The first step is to call the Board Meeting by issuing notice at least seven days before the meeting. The approval of the Board of Directors is required for increasing the Authorized Capital and altering the Capital Clause of the Memorandum of Association. In Board Meeting, the date of Extra-ordinary General Meeting is required to be fixed. Notice of the meeting along with the Explanatory Statement to the notice as per section 102(1) will be approved.
- Issue of Notice: Issue Notice for the Extra-ordinary General Meeting along with the Explanatory Statement to the notice as per section 102(1).
- Holding of Meeting and Passing of Resolution: In Extra-ordinary General Meeting, Ordinary Resolutions are required to be passed for increasing the Authorized Share Capital and for Altering the Capital Clause of the Memorandum of Association.
- Filing of SH-7 with the Registrar of Companies: The Company is required to file e-form SH-7 with the respective Registrar of Companies along with the attachments.
ATTACHMENTS TO E-FORM SH-7:
1. Notice of Extra-Ordinary General Meeting.
2. Copy of Ordinary Resolution.
3. Altered Memorandum of Association
DRAFTS:
1. Notice of Extra-Ordinary General Meeting.
NOTICE
Notice is hereby given that an Extra-ordinary General Meeting of members of ______________________Ltd will be held on [DAY] on [DATE] at [TIME] at its registered office at ______________________________, to transact the following business:
SPECIAL BUSINESS:
Item No. 1
INCREASE IN AUTHORIZED SHARE CAPITAL:
To consider and if thought fit, to pass with or without modification(s), the following Resolution as Ordinary Resolution:
“RESOLVED THAT pursuant to section 13, 61, 64 and other applicable provisions, if any of the Companies Act, 2013 and the rules framed there under, the consent of the members be and is hereby accorded to increase the Authorized Share Capital of the Company from Rs. ______________In words) divided into ______________ (In words) Equity Shares of Rs. __________(In words) each to Rs. ______________(In words) divided into ____________(In words) Equity Shares of Rs. __________(In words) each.”
“FURTHER RESOLVED THAT clause V of the Memorandum of Association be and is hereby deleted and the following new clause be substituted in place thereof:
1. The Authorized Share Capital of the Company is ________________(In words) divided into ______(In words) Equity Shares of Rs. __________(In words) each.”
“FURTHER RESOLVED THAT Mr.____________(DIN:__________), Director of the Company be and is hereby authorize to do all acts, deeds and things necessary and incidental to give effect to the aforesaid resolutions including but not limited to filing of e-forms with the Registrar of Companies.”
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For and on behalf of the Board of Directors of ____________________________Ltd |
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| Date:
Place: |
DIRECTOR
DIN: _______ |
NOTES:
1. A Member Entitled To Attend And Vote At The Meeting Is Entitled To Appoint A Proxy To Attend And Vote Instead Of Himself And The Proxy Need Not Be A Member Of The Company.
2. The Proxy In Order To Be Effective Must Be Deposited At The Registered Office Of The Company Not Less Than 48 Hours Before The Time Of Holding Meeting.
3. The Explanatory Statement Pursuant To Section 102 Of The Companies Act, 2013 In Respect Of Special Business Set Out As Above, Is Annexed Hereto.
EXPLANATORY STATEMENT
The Company proposes to increase the Authorized Capital from existing Rs. ________________(In words) divided into __________________ (In words) Equity Shares of Rs. __________(In words) each to Rs. ________________(In words) divided into __________________ (In words) Equity Shares of Rs. __________(In words) each.”
Pursuant to section 61 of the Companies Act, 2013 and the Companies (Share Capital and Debentures) Rules, 2014, the Company is required to pass Ordinary Resolution in its General Meeting for increasing the Authorized Capital. Therefore it is proposed to pass Ordinary Resolution.
Further increasing the Authorized Capital will also result in alteration of Capital Clause of Memorandum of Association. Therefore it is proposed to alter Clause V of the Memorandum of Association.
None of the Directors or their relative are interested in the proposed Resolution.
All the relevant documents can be inspected at the office hours on working days at the registered office of the Company.
//CERTIFIED TRUE COPY//
| FOR ______________________________LTD | |
| DIRECTOR
DIN: _______ |
DIRECTOR
DIN: _______ |
2. CERTIFIED TRUE COPY OF ORDINARY RESOLUTION
CERTIFIED TRUE COPY OF THE ORDINARY RESOLUTION PASSED IN THE EXTRA-ORDINARY GENERAL MEETING OF MEMBERS OF ______________________________LTD HELD ON __________ (DAY) THE ________________ (DATE) AT ___________ (TIME) AT THE REGISTERED OFFICE OF THE COMPANY AT ______________________________________
INCREASE IN AUTHORIZED SHARE CAPITAL OF THE COMPANY:
“RESOLVED THAT pursuant to section 13, 61, 64 and other applicable provisions, if any of the Companies Act, 2013 and the rules framed there under, the consent of the members be and is hereby accorded to increase the Authorized Share Capital of the Company from Rs. ________________(In words) divided into ___________ (In words) Equity Shares of Rs. __________(In words) each to Rs. ________________(In words) divided into _________________(In words) Equity Shares of Rs. __________(In words) each.”
“FURTHER RESOLVED THAT clause V of the Memorandum of Association be and is hereby deleted and the following new clause be substituted in place thereof:
1. The Authorized Share Capital of the Company is ________________(In words) divided into _________ (In words) Equity Shares of Rs. __________(In words) each.”
“FURTHER RESOLVED THAT Mr.____________(DIN:__________), Director of the Company be and is hereby authorize to do all acts, deeds and things necessary and incidental to give effect to the aforesaid resolutions including but not limited to filing of e-forms with the Registrar of Companies.”
//CERTIFIED TRUE COPY//
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FOR ______________________________LTD
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| DIRECTOR
DIN: _______ |
DIRECTOR
DIN: _______ |
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