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Increase in authorized share capital

Step 1- Verifying approval within the Articles of Association 

Section 61 of the Companies Act, 2013, orders that for expanding the Authorized offer capital, approval in Articles of Association is a pre-condition. Hence verifying that the necessary provisions are spelled out within the Articles is a pre-requisite to increasing authorized share capital.

In case the Articles do not approve an increase, it is then incumbent to amend them to allow the same before proceeding, as per the provision of Section 14 of the Companies Act, 2013. The Article of Association should be amended by a special resolution.

Step 2- Board meeting to notify the incidence of EGM 

A board meeting is called wherein it is decided that an EGM is to be held to discuss and vote on the matter of raising authorized share capital. Once the date, place, and time of the EGM are agreed upon by the Board, a notice for the same is issued to every member/shareholder, director, auditor of the company, who will thereafter vote upon the matter of raising authorized share capital, as per Section 101 of the Companies Act 2013.

Moreover, the notice must consist of the voting method that is to be utilized for passing the special resolution to increase the authorized share capital of the company, and the explanatory statement pursuant to Section 102 of the Companies Act is to be enclosed as well.

Step 3- Extraordinary General Meeting 

Once notice of the impending EGM has been sent out and the meeting is in session, the matter of increasing authorized share capital is deliberated upon and then voted upon in the manner set forth in the notice for the incidence of the EGM. The Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, is then passed to increase in authorized share capital of the Company.

Step 4- ROC Form documenting 

Within a time, frame of 30 days of the passing of Ordinary Resolution, Form SH-7 must be filed with the concerned Registrar of Companies (RoC) along with the necessary fees and attachments as prescribed by Section 64. In addition to the altered MoA and AoA, the following attachments are required to be submitted along with e-form SH-7 

  • Board Resolution for increase in authorized share capital;
  • Board resolution for modification in the capital clause of Memorandum of Association;
  • Shareholders’ Resolution that has been passed in the EGM.

The RoC will then check the forms and attached documentation. If all necessary requirements are fulfilled, RoC shall approve the Increase Authorized Share Capital.

 

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