Increase of Authorised Capital Service

What is Authorised Capital?

Authorised capital, also referred to as registered or nominal capital, is the maximum amount of share capital that a company is authorised to issue to shareholders. This does not imply the capital has been issued or will be, but it sets a limit to how much a company can potentially raise by issuing shares.

Importance of Increasing Authorised Capital

Increasing authorised capital is crucial for companies looking to expand, seeking additional investment, or restructuring debts. It provides room for a company to welcome new investors or issue new shares without requiring immediate cash inflow from the existing shareholders. This increase allows companies to bolster their capital base, supporting growth and operational flexibility.

Legal Framework under Companies Act 2013

Under the Indian Companies Act 2013, any increase in authorised capital must follow certain procedural steps, including board approval, shareholder consent, and compliance filings with the Registrar of Companies (ROC). This legal framework ensures transparency and regulates how companies manage their capital structure.

Process to Increase Authorised Capital

1. Board Meeting

The process begins with conducting a board meeting where a resolution to increase authorised capital is proposed and approved by the board of directors.

2. Shareholders' Approval

Following board approval, an extraordinary general meeting (EGM) is convened where the shareholders discuss and resolve to increase the authorised capital. A special resolution is passed, which is crucial for proceeding further.

3. Filing with ROC

Post shareholders' approval, Form SH-7 must be filed with the ROC within 30 days of passing the resolution. This form includes details about the change in capital structure and the special resolution copy.

4. Payment of Fees

Appropriate fees and stamp duty as per the slab rates of the MCA must accompany the filing, ensuring all regulatory dues are cleared.

Implications and Benefits

Financing Growth

Increasing your authorised capital allows companies to raise more funds, which can be utilized for business expansion, paying off liabilities, or entering new markets.

Operational Flexibility

It provides flexibility for companies to issue additional shares quickly during strategic opportunities without lengthy compliance checks each time.

Improved Investor Confidence

A solid capital base can instill confidence among potential investors regarding the company's growth potential and investment attractiveness.

Challenges and Considerations

1. Strategic Planning: Companies must carefully strategize how increased capital will be utilized and ensure their plans are viable.
2. Legal Compliance: Maintaining thorough records and ensuring compliance with legal requirements to avoid penalties.

Conclusion

Increasing your company’s authorised capital under the Companies Act 2013 is a strategic move that can significantly influence growth and investor relations. It requires meticulous planning, adherence to regulatory requirements, and a clear understanding of your company’s financial strategies. Engage with experienced professionals to navigate the regulatory landscape efficiently and effectively transition to a higher capital base.