What is the authorized capital?
Authorized Share Capital is the maximum limit of share capital up to which a company can issue its shares to shareholders. No shares can be issued by the company beyond the specified limit. Hence, if a company wants to issue shares beyond the limit then it has to make certain changes to its MOA as per the Companies Act.
The paid-up and authorized share capital is specified in the Memorandum of Association(MOA) of the company.
Procedure in order to increase the authorized capital of a company
A company must check its MOA and AOA about the limit of authorized capital. The issue of shares beyond the specified limit of authorized capital can only be done after making an amendment in MOA l. Before increasing, the company must check whether it can do so legally as per the norms of association of the company.
Alteration of AOA:
Approval from the shareholders in an annual general meeting or extraordinary general meeting must be obtained by the company before altering the Articles of Association(AOA). Filing of Such altered AOA with MCA must be done within 30 days from the date of the resolution.
Procedure to increase authorized capital can be proceeded with once the AOA is altered
Step 1: Board Meeting
In order to take the approval of the board to increase authorized share capital board meetings must be arranged. Further, to decide the date and time to call an EGM or AGM to take the shareholders’ approval. Notice for holding an EGM or AGM must be sent to all the shareholders as per the rules. A director must be authorized to file all the necessary forms with the MCA Portal.
Step 2: Shareholders Meeting
EGM/AGM on the specified date and time shall behold by the company to take the approval for the increasing authorized capital. The shareholders must pass an ordinary resolution in the meeting.
Step 3: Intimation to the ROC
After approval has been taken in the shareholders meeting, the altered MOA, to increase the authorized share capital, shall be drafted by the company. Intimation of such alteration shall be filed by the company with MCA in Form SH-7. The form must be filed within 30 days from the date of resolution. The following documents are required to be filed.
- In relation to alteration in AOA a certified true copy of Board resolution.
- In relation to alteration of MOA a certified true copy of Board resolution
- Notice of EGM/AGM
- A certified true copy of Shareholders resolution
- Copy of altered AOA
- Copy of altered MOA
On receiving approval from the MCA, a company shall alter its every copy of the MOA and AOA.