PLC
How to Increase Share Capital of Company
To incorporate any company, a certain amount is required to be invested in it, in order to carry out the business activities. This amount that is invested by the members of the company is known as the share capital, which is mainly the maximum amount for which a company can issue its shares. However, paid-up share capital is different from the authorized share capital. Authorized share capital is the offers that a company can issue, paid-up share capital is the aggregate estimation of the offers that have been issued by the company. Even though both authorized share capital and paid-up share capital of a company can be increased, at any point of time after its incorporation, the paid-up share capital can never surpass the authorized share capital of the company.
The process of alteration in share capital of a company is governed by Section 61 read with Section 13 and 64 of the Companies Act, 2013. To increase the share capital of a company, the first and foremost thing that needs to be done is to call a board meeting, which will be witnessed by the members of the board as well as the Shareholders who will pass a resolution approving the increase in the authorized share capital of the company. It is necessary for a company to have the provision of expanding its share capital, this alteration should be mentioned in the Articles of Association (AoA) of the company, as stated by Section 61 of the Companies Act, 2013.
After ensuring that the AoA of the company has an arrangement for expanding the share capital of the company, an extra ordinary general meeting is supposed to be conducted in which a resolution needs to be passed, with the consent of all the members of board. Once the consent of Members is acquired, our team of experts will collect a copy of the notice for the meeting and a copy of the resolution passed therein and file relevant E-Forms to get approval from the ROC to increase the share capital of the company. The concerned RoC will approve the application after verifying the E-form thoroughly.
Now that we know about the basic procedure that is followed to increase the share capital of the company in general, let’s discuss how to increase paid-up share capital as well as authorized share capital in detail.
How to increase the Paid-Up Share Capital of a Company –
For increasing the paid-up share capital of a company, new shares must be issued and allocated at a Board Meeting with the consent of all the Members of Board of the company. The return of distribution should be conveyed to the concerned Registrar of Companies of the Companies Act, 2013. This process will be carried out by our experts at All India ITR.
- The Members of the Board will conduct a General Meeting or a Board Meeting in which the new shares will be distributed and allocated to the Shareholders with the consent of all the Members.
- Once the approval is taken from the Members, a copy of the notice of the meeting and the board resolution will be required by our team to file Form SH-7 to file for increasing the paid-up capital of the company.
- While filing SH-7, it is mandatory to attach a list of the shareholders who have been allotted new shares and the amount of each share allotted.
- A certified Chartered Accountant or Company Secretary will need to verify Form SH-7 before filing the same.
- Once SH-7 is submitted successfully with the concerned RoC, the Registrar will verify the application and will send his approval to increase the paid-up share capital of the company.
How to Increase Authorized Share Capital of a Company –
As mentioned earlier, it is mandatory for the Articles of Association of a company to contain a provision of making changes in the share capital of the company. In case, the company’s AoA doesn’t have any provision regarding expanding the share capital, the provisions of the Articles of Association will have to be amended and a clause related to share capital will have to be added.
After ensuring that the authorized share capital of the company can be increased, as authorized by the AoA of the company, a Board Meeting is supposed to be conducted, as per Section 173(3) of the Companies Act, 2013. The main agenda of this meeting would be –
- To get approval from the Directors for increasing the authorized share capital.
- To fix a date and time for calling an Extraordinary General Meeting, wherein an approval will be taken from the investors of the company by passing an ordinary resolution and to make alteration in the Memorandum of Association under the authorized share capital clause.
- To favor the notice of the EGM along with the explanatory statement that is attached to the notice for the Extraordinary General Meeting, as per Section 102 (1) of the Companies Act, 2013.
- After issuing the notice for the EGM, the meeting will be held on the date and time fixed in the Notice of EGM.
- Once the resolution is passed, a copy of the notice for the EGM along with the explanatory statement, a copy of the passed ordinary resolution and a copy of the altered Memorandum of Association should be sent to our team, so that we can file Form SH-7 on your behalf on the MCA web portal. Form SH-7 needs to filed within 30 days of passing the ordinary resolution with the concerned Registrar of Companies.
- The concerned RoC will verify the form and the attached documents, after which it will send the approval to increase the authorized share capital of the company.
As per Section 64 of the Companies Act, 2013, a notice will be sent to the concerned RoC by the company stating the increment in the authorized share capital along with a copy of the altered MoA. Buy our plan, for increasing the share capital of the company, so that we can save you from the hassle of going through the filing process.
FAQs
The capital of a company is the amount of money which is received by the shareholders to carry out the business activities of the company. The rules and regulations regarding any kind of capital is mentioned under the ‘Capital Clause’ of the Memorandum of Association of the company.
The capital invested in a company can be of two kinds –
- Authorized Capital – This is the maximum value of securities which the company can legally issue to its shareholders in the form of shares. The authorized share capital is always greater than the paid-up share capital and can be increased at any time with prior approval from the shareholders by passing a resolution.
- Paid-up Capital – This is the sum of money that is actually paid or invested by the shareholders of the company. Under the Companies Amendment Act, 2015, the requirement of having a minimum paid-up share capital has been removed at the time of incorporation of a company.
When a company is registered, the promoters of the company decide an amount for the authorized capital and the share value they will receive in return if they invest in the company.
However, as per recent amendment in Companies Act, there is no requirement of minimum capital to register a company.
Authorized Capital or Registered Capital is the maximum limit of the capital up to which a company can issue shares and collect money from its shareholders. The authorized capital can be increased at any point of time after the incorporation of the company by passing a resolution in a meeting of the shareholders.
