A company may need to increase its authorized share capital as it grows, meeting the demands of investors, lenders, or customers. Authorized capital, also called nominal capital, represents the maximum amount a company can allocate to shareholders. Many businesses start with a modest amount, but as they expand, they may find it necessary to increase this limit.
Increasing authorized share capital requires amendments to the Memorandum of Association (MOA), Articles of Association (AOA), and other relevant documents. This process ensures that the company's capital structure is aligned with its current and future needs. CSPRAKASH&CO, a leading practising company secretary in Coimbatore, can guide you through this complex process to ensure full compliance with legal requirements.
Steps to Increase Authorized Share Capital
- Board Meeting
- The first step involves calling a Board Meeting to discuss and approve the increase in authorized share capital. The company issues a Notice and explanatory statement under Section 102(1) of the Companies Act, 2013, to secure initial approval from directors.
- General Meeting & Resolution
- Next, a General Meeting is held to pass an Ordinary Resolution under Section 61(1)(a). An Extraordinary General Meeting (EGM) may be necessary to secure member approval. This meeting allows investors and shareholders to vote on the resolution to increase the capital. Typically, a 95% majority vote is needed to proceed.
- Filing Form MGT-14
- After the resolution is approved, the company must file Form MGT-14 with the Registrar of Companies (ROC) within 30 days. This form includes details of the resolution and modifications made to the MOA and AOA. Failure to file this form in time can result in penalties ranging from ₹5 lakhs to ₹25 lakhs.
- Filing e-Form SH-7
- The company must also submit e-Form SH-7 within 30 days to document the capital increase and convert new shares, debentures, or loans. Updated copies of the MOA and AOA should be filed within 15 days of this filing. Delays in submission can incur fines of ₹1,000 per day, up to a maximum of ₹5 lakhs.
Importance of Compliance
Working with a practising company secretary like CSPRAKASH&CO can streamline this process and ensure your company adheres to all legal requirements. Our team, based in Coimbatore, handles documentation and compliance efficiently, allowing you to avoid hefty fines and focus on growth. Adhering to the steps above ensures transparency and legal compliance, essential for maintaining investor confidence and smooth corporate operations.
To maximize efficiency, CSPRAKASH&CO uses digital tools to submit these documents electronically on the Ministry of Corporate Affairs (MCA) portal, ensuring a seamless and compliant increase in your authorized share capital.
For more details on how CSPRAKASH&CO can support your company, visit our website or contact our office in Coimbatore. Let us help you navigate these regulatory processes with confidence.
