December 14, 2018

Increase in Authorised Share Capital

Increase in Authorised Share Capital

Authorised Share Capital of a company is the maximum amount of capital that the company is authorized to collect by way of share capital from its shareholders. This is the maximum capital that the company can allocate among its shareholders.

The company has no right to issue shares more than its authorised share capital, but with the passing years as the business of the company grows the need of capital also increase therefore the law has permitted the company to increase its authorised share capital as and when required.

 As per Companies Act 2013, the increase in share capital of the company is guided by Section 61 read with section 13 and 64 of the Companies Act 2013.

Authorized share capital is mentioned in the  clause V of the Memorandum of Association states

” The authorised share capital of the Company is Rs. _____________(amount of share capital) divided into _____ (number of shares)shares of Rs._ each(Face value of share)”

and it is also mentioned in clause IV of the Article of Association

“The Authorised Share Capital of the Company shall be such amounts and be divided into such shares as may, from time to time, be provided in Clause V of the Memorandum of Association with power to increase or reduce the capital in accordance with the Company’s regulations and legislative provisions for the time being in force in that behalf with the powers to divide the share capital, whether original increased or decreased into several classes and attach thereto respectively such ordinary, preferential or special rights and conditions in such a manner as may for the time being be provided by the Regulations of the company and allowed by law.”

 

1.For Increase in Authorised Share capital Authorisation in Article is must: 

Authorised share capital can be altered by the company only if there is a clause in the Article permitting to increase the authorised share capital.

If there is no clause in Articles permitting to increase the authorised share capital then the company can make changes in the Articles of Association of the company by inserting a clause in Articles with the provisions of section 14 of the Companies Act 2013 by passing Ordinary Resolution . For increase in share capital authorisation in Article of Association is precondition.

2. Notice for Calling the meeting for Board of Directors 

For calling Board Meeting issue Notice to the directors of the company as per provision of Section 173 (3) of Companies Act 2013. In notice convening the Board Meeting must contain the agenda of the board meeting and date, time and place of board meeting to be given.

Specimen of notice calling for board meeting:- (click here)

Specimen of Agenda of Board Meeting (Click here)

SPECIMEN OF RESOLUTIONS TO BE PASSED IN THE BOARD MEETING FOR CALLING OF AN EGM;- (click here)

 

Issue Notice of Extra ordinary General meeting to its all the Share holders, Directors, Auditor of the company as per Section 101 of Companies Act 2013.

Specimen of Notice of  Extraordinary General Meeting:- (click here)

  • Holding Extraordinary General Meeting

After serving the notice of EGM,  extraordinary general meeting shall be held and for increasing the authorized share capital of the company it shall be done by passing a special resolution in EGM. Thereafter all the obligations are done accordingly.

  • Alteration in AOA & MOA of company

After the special resolution has been passed alteration shall be made in AOA & MOA of the company.

Secretarial procedure to be followed while making alteration in authorized share capital:

Filing of E form MGT-14

The E form MGT-14 shall be filed with a Registrar of Companies true copy of special resolution, notice, explanatory statement within 30 days of passing a special resolution with amended MOA & AOA thereof.

But filing of MGT-14 does not considered to be the effective date of increase in authorized share capital of the company.

Attachments should be filed with MGT-14:- (click here)

  • Filing of E form SH-7

Once the special resolution has been made by the company then the company has been obliged to give the notice to the registrar of company as per section 64(4) of the companies act 2013 in the e form SH-7 within a period of 30 days of passing such resolution. With effect from passing special resolution the authorized share capital can be increased. A stamp duty regarding that should be paid thereof.

 Attachments should be filed with SH-7:(click here)

 

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