Authorised Capital Increase
Under the Companies Act, 2013, "Authorised Capital Increase" is the legal process of raising the maximum amount of share capital that a company can issue, as indicated in its Memorandum of Association (MOA).
Authorised capital is the most share capital that a corporation can give to its shareholders.
If a business wishes to:
Give out additional shares
Get fresh investors on board
Get more money
Change debts into equity
Increase its capital basis
First, it has to raise its approved share capital.
In other words, a permitted capital increase gives the corporation more ways to get money.
Legal Rules for Increasing Authorised Capital
The rules for increasing authorised capital are:
✅ The Companies Act, 2013, Section 61
✅ Section 13 (if changes to the MOA are needed)
✅ Rules for Companies (Share Capital and Debentures)
✅ Company's Memorandum of Association (MOA)
✅ Articles of Association (AOA)
The corporation needs to be sure that their AOA allows for this kind of expansion.
If not, AOA has to be changed first.
How to Raise Authorised Capital Step by Step
Look over AOA
Check to see if AOA allows for an increase in allowed capital.
If not, change the AOA first.
Meeting of the Board
The Board of Directors:
Gives the go-ahead for the request to raise
Sets the date for the General Meeting
Gives the green light for notification to shareholders
The board's decision is final.Get the shareholders' approval
At the General Meeting:
Most of the time, pass an ordinary resolution.
Special Resolution (if AOA says so)
Shareholders agree to raise the permitted capital.Send in your application to ROC
Within 30 days, you must file the necessary forms:
Form SH-7 (to raise the authorised capital)
Form MGT-14 (if you need to file a resolution)
Add:Copy of the resolution that is certified
Changed MOA
Changed AOA (if changed)Pay the fees and stamp duty
The amount of money the government charges for filing depends on:
More money in capital
Type of business
According to state legislation, you must additionally pay stamp duty.Get ROC Approval
After checking:
ROC gives the go-ahead for the rise
MCA records are updated with the new authorised capital.
New shares can only be issued after getting the go-ahead.
Why an Authorised Capital Increase Is Important
Raising approved capital:
✔️ Makes rounds of fundraising possible
✔️ Helps businesses grow
✔️ Makes it easier for investors to get in
✔️ Helps give out bonus shares
✔️ Allows for the formation of ESOP
✔️ Aligns the structure of capital with goals for growth
It gets the firm ready to grow in the future.
Mistakes that happen often while raising authorised capital
Not looking at AOA rules
Not filing a resolution
Wrong change to the MOA
Filing of SH-7 is late
Wrong computation of fees
Fees from the government for raising capital
The costs for ROC filings go up as the capital slabs get up.
More capital means:
Fees for filing are higher
More stamp duty
Planning beforehand helps you prevent extra costs.
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