Procedure To Increase Authorised Capital of a Company By CS Annu Sharma


Dear Professionals
 
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Every time a business supposed to expand financially by issuing further share there should be an adequate margin between Paid up and authorized capital, in this write we will go through the procedure through we can increase our authorized capital, as given Under Companies Act, 2013, the process of Increase in Authorize Capital, is governed by Section 61 read with Section-13 and 64 of Companies Act, 2013.

Section 13 of Companies Act 2013 regulates the process of amendment in Memorandum of Association is applicable to all companies. All clauses of Memorandum except Capital clause can be altered by following the provisions of Section 13 of Companies Act, 2013 by passing a special resolution.

Here we go through what section actually describes:

Section 61 (1) of the act states that a limited company having a share capital if so authorized by its articles, alter the conditions of its memorandum to increase its share capital by such amount as it thinks expedient by issuing New Shares.

Furthermore, section 14(1) of the act states that the articles of the company can be altered by a special resolution if so allowed by the memorandum of the Company.
 
PROCEDURE TO INCREASE AUTHORISED CAPITAL AS WELL AS CHANGE IN CAPITAL CLAUSE OF MOA.

1) – IF THERE IS NO REQUIREMENT OF ALTERATION IN ARTICLE OF ASSOCIATION
 

First Check is there any provisions in Article of Association regarding the increase in capital (generally in clause 35) If AOA ‘states that authorized capital shall be as per MOA’ then no need for alteration in Article of Association.

Convey Board Meeting of Directors: (As per section 173 and SS-1)

Issue Notice of Board Meeting to all the directors of the company at least 7 days before the date of Board Meeting.

Held Board Meeting: (As per section 173 and SS-1)

Get Approval to Increase in the authorized capital and recommending the proposal for members’ consideration by way of Ordinary Resolution.

Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.

 Approval of Notice of EGM

Issue Notice of General Meeting: (Section 101) Notice of EGM shall be given at least 21 days before the actual date of EGM. EGM can be called on Shorter Notice with the consent of at least majority in number and ninety-five percent of such part of the paid-up share capital of the company giving a right to vote at such a meeting:

·         All the Directors.

·         Members

·         Auditors of Company

The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.

Hold General Meeting: (Section 101)

Check the Quorum.

Check whether the auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).

Pass Ordinary Resolution.[Section-114(1)]

 Approval of Alteration in MOA.

Filing and Fees:

File FORM SH-7(Section-64(1) read with Rule 15 of The Companies (Share Capital and Debentures) Rules, 2014 ) within 30 days of passing the Ordinary resolution

 
WHAT SHALL BE THE ATTACHMENT OF FORMS
  • Certified True Copies of the Ordinary Resolutions along with explanatory statement;
  • Copy of the Notice of meeting sent to members along with all the annexure;
  • A printed copy of the Altered Memorandum of Association
  • Minutes of General Meeting.
 
2- IF THERE IS REQUIREMENT OF ALTERATION IN ARTICLE OF ASSOCIATION
When AOA contains provision objection alteration in capital clause then firstly alter AOA the only we can alter capital clause in MOA.
 

Convey Board Meeting of Directors: (As per section 173 and SS-1)

Issue Notice of Board Meeting to all the directors of the company at least 7 days before the date of Board Meeting.

  • Attach Agenda
  • Notes to Agenda
  • Draft Resolution

Hold Board Meeting: (As per section 173 and SS-1)

Get Approval to Increase in the authorized capital and recommending the proposal for members’ consideration by way of Ordinary Resolution.

Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.

Approval of Notice of EGM

Proposal for alteration in MOA & AOA

Issue Notice of General Meeting: (Section 101)

Notice of EGM shall be given at least 21 days before the actual date of EGM. EGM can be called on Shorter Notice with the consent of at least majority in number and ninety-five percent of such part of the paid-up share capital of the company giving a right to vote at such a meeting:

  • All the Directors.
  • Members
  • Auditors of Company

The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.

Hold General Meeting: (Section 101)

Check the Quorum.

Check whether the auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).

Pass Special Resolution.[Section-114(2)]

Approval of Alteration in MOA and AOA

FILING AND FEES:

File FORM NO. MGT-14 (Filing of Resolutions and agreements to the Registrar under section 117) with the Registrar along with the requisite filing within 30 days of passing the special resolution.

FILING OF FORM SH-7

File FORM NO. SH-7 (Section-64(1) read with Rule 15 of The Companies (Share Capital and Debentures) Rules, 2014 )within 30 days of passing the Ordinary resolution, along with given documents:-

1.       Certified True Copies of the Special Resolutions along with explanatory statement;

2.       Copy of the Notice of meeting sent to members along with all the annexure;

3.       A printed copy of the Altered Memorandum of Association and Article of Association.

4.       Minutes of General Meeting.

Concerned Registrar of Companies (ROC) will check the E-form and attached the documents and will approve the increase in Authorize capital of the company.

 
At the End Company looking for the issue shares must check the current authorized capital of the company, as the issue cannot be in excess of the amount of authorized capital. Therefore in the view of the above, a company may have to increase the authorized capital and make modifications to the MOA of the company, The company is bind to follow each and every part of the procedure as explained and mentioned in the statute failing which, the company shall be punishable with a hefty penalty.

However, the increase in capital of the company, in the long run, benefit its investors in the form of increased return on equity through capital gains, an increase in dividend payouts or both. Bank also usually prefer to give a loan to the company depending upon the authorized capital. Thus, authorized capital is also helpful for a company in growth. It is helpful in avoiding unnecessarily implications.

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