Increase in Authorised Share Capital
The share capital is part of company’s capital which is raised through issue of shares. A company may raise capital only to the extent of the authorized capital mentioned in the company. To increase the capital raising capacity, the authorized capital can also be increased any time after incorporation by payment of additional fee and stamp duty.
A company can issues shares only to the extent of authorized capital. Hence, it determines the number of shares a company can issue which is mentioned in the Capital Clause of MoA. In order to increase capital raising capacity, it has to increase the authorized capital first. To alter authorized capital clause, the company need to conduct a meeting of Board and Member that is followed by application to MCA.
Benefits of Increase the Authorized Capital
There are many advantages behind this:
- Money to grow the business: Company may grow their business with an infusion of cash derived from the sale of stock without any borrow from traditional sources.
- Money for Shareholders and Others: When the company has more cash then they offer additional compensation may be offered to Investors, Stakeholders, Founders, Senior Management and many more.
- Other Benefits of Going Public: Once the company has gone public then extra equities may be easily sold to raise capital.
Process to Increase Authorized Capital
The authorized capital of the company can be increased at any time. However, the procedure to Increase Authorized Capital are;
- Verifying Approval within the Articles of Association.
- Held a board of meeting to notify about the incidence of EGM.
- Extraordinary General Meeting.
- ROC Form Documenting
These are the mandatory documents which are required to be filed by the company:
- Filing of Form SH-7.
- Altered Copy of MOA and AOA.
- Board Resolution Passed by the Company
- Resolution passed in extra ordinary general meeting (EGM)
- Notice of EGM explanatory Statement.