Increase Authorised Capital – Online Process Certified Service

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Increase Authorised Capital – Online Process Certified Service by MyCAfiling

Increasing the authorised capital of a company is a critical step for businesses looking to expand, secure new investments, or strengthen their financial position. In this comprehensive guide, we’ll walk you through the process of increasing authorised capital, its benefits, the legal requirements, and how MyCAfiling can help you achieve this at the lowest cost.

What is Authorised Capital?

Authorised capital, also known as authorised share capital or nominal capital, refers to the maximum amount of capital that a company is allowed to issue to shareholders. It represents the upper limit of a company’s share capital as specified in its Memorandum of Association (MOA). The authorised capital is divided into shares of a certain value, and it determines the maximum number of shares a company can issue.

Why Increase Authorised Capital?

There are several reasons why a company might need to Increase Authorised Capital:

• Expansion Plans: To raise additional funds for business expansion or to enter new markets.
• Investment Opportunities: To attract new investors or venture capitalists.
• Debt Repayment: To raise capital for repaying existing debt or financing new projects.
• Employee Stock Options: To create an employee stock option plan (ESOP) and issue shares to employees.

Increasing authorised capital can provide the company with the financial flexibility needed to pursue its strategic goals and strengthen its financial foundation.

Legal Requirements for Increasing Authorised Capital

Increasing authorised capital involves several legal and regulatory steps. Here’s a step-by-step guide to help you navigate the process:

1. Board Resolution

The first step in increasing authorised capital is to convene a board meeting and pass a resolution approving the increase. The board resolution should include:

• The current authorised capital
• The proposed Increase Authorised Capital
• The new authorised capital after the increase
• The rationale for the increase

2. Shareholders’ Approval

After obtaining the board’s approval, you need to get the shareholders’ approval through a special resolution passed at an extraordinary general meeting (EGM). The special resolution should detail the Increase Authorised Capital and the reasons for the increase.

3. Filing of Form SH-7

File Form SH-7 with the Registrar of Companies (RoC) to notify the increase in authorised capital. This form must be filed within 30 days of passing the special resolution. The form should include:

• Details of the Increase Authorised Capital
• Revised capital structure of the company
• Copy of the special resolution

4. Amendments to Memorandum of Association (MOA)

Update the company’s Memorandum of Association (MOA) to reflect the increased authorised capital. The MOA should be amended to specify the new authorised capital and the number of shares.

5. Issuance of New Share Certificates

If new shares are issued as part of the Increase Authorised Capital, you will need to issue new share certificates to the shareholders. Ensure that the share certificates reflect the new capital structure.

6. Update Company Records

Update the company’s records and registers to reflect the Increase Authorised Capital. This includes:

• Register of Members
• Register of Share Capital
• Statutory registers as required by the Companies Act, 2013

7. Notify Stock Exchanges (If Applicable)

If the company’s shares are listed on a stock exchange, notify the exchange about the increase in authorised capital and comply with any additional requirements.

Procedure for Increasing Authorised Capital

Let’s break down the detailed procedure for increasing authorised capital:

Step 1: Convene a Board Meeting

Hold a board meeting to discuss and approve the increase in authorised capital. Prepare and pass a board resolution outlining the details of the increase.

Step 2: Call an Extraordinary General Meeting (EGM)

Call an extraordinary general meeting (EGM) of the shareholders to seek their approval for the Increase Authorised Capital. Ensure that the EGM agenda includes the special resolution for the increase.

Step 3: Pass a Special Resolution

At the EGM, pass a special resolution to approve the Increase Authorised Capital. The resolution should specify the new authorised capital and the number of shares.

Step 4: File Form SH-7

Prepare and file Form SH-7 with the Registrar of Companies (RoC) within 30 days of passing the special resolution. Attach the following documents:

• Copy of the special resolution
• Revised capital structure of the company

Step 5: Amend the Memorandum of Association (MOA)

Update the MOA to reflect the new authorised capital. File the amended MOA with the RoC.

Step 6: Issue New Share Certificates

If new shares are issued, prepare and issue new share certificates to the shareholders. Ensure that the certificates reflect the new authorised capital.

Step 7: Update Company Records

Update the company’s statutory records and registers to reflect the Increase Authorised Capital. Maintain accurate records as required by the Companies Act, 2013.

Step 8: Notify Stock Exchanges (If Applicable)

If the company is listed, notify the stock exchange about the increase in authorised capital and comply with any additional listing requirements.

Benefits of Increasing Authorised Capital

Increasing authorised capital offers several benefits to a company:

1. Enhanced Financial Flexibility

With a higher authorised capital, the company has the flexibility to raise additional funds through the issuance of new shares. This can support expansion plans, debt repayment, or other strategic initiatives.

2. Attraction of Investors

A higher authorised capital can make the company more attractive to potential investors. It signals financial stability and growth potential, which can help attract venture capitalists and institutional investors.

3. Employee Stock Options

Increasing authorised capital allows the company to issue stock options to employees as part of their compensation package. This can help attract and retain talented employees and align their interests with the company’s success.

4. Debt Financing

A higher authorised capital can improve the company’s ability to secure debt financing. Lenders may view a higher capital base as a sign of financial strength, which can enhance the company’s creditworthiness.

5. Improved Market Perception

Increasing authorised capital can positively impact the company’s market perception. It reflects growth and expansion, which can boost investor confidence and market value.

How MyCAfiling Can Help

Navigating the process of increasing authorised capital can be complex and time-consuming. MyCAfiling offers a range of services to simplify this process and ensure compliance with legal requirements. Here’s how MyCAfiling can assist you:

1. Expert Guidance

MyCAfiling provides expert guidance on the entire process of increasing authorised capital. Our team of professionals will help you understand the requirements, prepare necessary documents, and ensure compliance.

2. Document Preparation

We assist in preparing all required documents, including board resolutions, special resolutions, and Form SH-7. Our services ensure that all documentation is accurate and complete.

3. Filing with Registrar of Companies (RoC)

MyCAfiling handles the filing of Form SH-7 and other necessary forms with the Registrar of Companies (RoC). We ensure timely submission and compliance with legal requirements.

4. MOA and AOA Amendments

We help update your company’s Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the increased authorised capital. Our services ensure that all amendments are filed correctly with the RoC.

5. Share Certificates and Records

MyCAfiling assists in issuing new share certificates and updating company records to reflect the increased authorised capital. We ensure that all records are maintained accurately.

6. Compliance Assurance

Our services include ensuring full compliance with legal and regulatory requirements, reducing the risk of penalties and legal issues.

7. Cost-Effective Solutions

MyCAfiling offers the lowest cost solutions for increasing authorised capital, making it affordable for businesses of all sizes. We provide value-for-money services without compromising on quality.

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