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Increase of Capital

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One of the main sources of capital for a company is through the issue of shares.  Authorized Capital or Registered Capital of a company is the upper limit of capital for which a company can issue shares and collect money from shareholders. In case of fresh issue of shares, if the unissued capital is not sufficient to cater to the issue requirements, the authorized capital can be increased to meet the requirements. Our Authorized Capital Increase service covers the following:

  • Documentation for increase of capital
  • Vetting of documents by certified professionals
  • Filing of documents

Overview

A company can increase its authorized capital by following the prescribed procedures under company laws. It involves passing necessary resolutions by shareholders and filing documents with the ROC. The registration fee payable to the ROC depends on the authorized capital of the company. Hence, every time there is an increase in authorized capital, the differential fee is payable to the ROC. Certain states in India mandate the payment of stamp duty on authorized capital. Therefore, the required stamp duty is also required to be paid by companies while increasing the authorized capital in those states.

The increase in authorized capital involves amending the company’s MOA. In certain cases, the Articles of Association (AOA) of the company also contains the authorized capital clause. In such cases, the respective clause in the AOA also needs to be changed for every increase in capital.

Pre-requisites

  • A company can increase the authorized capital at any point of time without any preconditions.
  • An ordinary resolution is required to be passed at the General Meeting for amendments made to the capital clause of the company’s MOA.
  • If the company’s AOA contains the authorized capital clause, then a special resolution is also required to be passed at the General Meeting for amending the same.

Procedure

  • Convene a Board Meeting to consider the proposal and call for a General Meeting.
  • Conduct the General Meeting and pass the requisite resolutions for increase in capital.
  • Prepare the minutes of the meeting and get the process/documents vetted by certified CS / CA / CWA professionals
  • File Form 5 certified by a professional with the ROC within 30 days of passing the resolution for increase in capital with the requisite fee for the increase in capital.
  • File the copy of resolution in Form 23 (in case it involves amendment to the AOA) certified by a professional with teh ROC within 30 days of passing the resolution.
  • Make necessary changes in the MOA and AOA of the company.
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A company can increase its authorized capital by following the prescribed procedures under company laws. It involves passing necessary resolutions by shareholders and filing documents with the ROC. The registration fee payable to the ROC depends on the authorized capital of the company. Hence, every time there is an increase in authorized capital, the differential fee is payable to the ROC. Certain states in India mandate the payment of stamp duty on authorized capital. Therefore, the required stamp duty is also required to be paid by companies while increasing the authorized capital in those states.

The increase in authorized capital involves amending the company’s MOA. In certain cases, the Articles of Association (AOA) of the company also contains the authorized capital clause. In such cases, the respective clause in the AOA also needs to be changed for every increase in capital.


What is authorized capital?

Authorized Capital or Registered Capital of a company is the upper limit of capital for which a company can issue shares and collect money from shareholders. Authorized capital can be enhanced at any time by passing a resolution at a meeting of shareholders.

What is issued capital?

Issued capital refers to the total amount of capital issued by the company to shareholders. The issued capital cannot be more than the authorized capital.

What is unissued capital?

Unissued capital refers to the portion of authorized capital that is unissued. The total of issued and unissued capital should be equal to the authorized capital.

What is paid-up capital?

Paid-up capital of a company refers to the amount of capital actually brought in by shareholders to the company.

What is share premium? Is it a part of share capital?

Share premium is not a part of share capital and is the additional amount collected from shareholders. It will be kept in a separate account and be used only for certain specific purposes. Share premium will not be considered for calculation of authorized/issued/paid-up and unissued capital.

What is the fee payable for increase of authorized capital?

The fee is based on the paid-up capital of the company. You can compute the fee using our online fee calculator.

Who can increase the authorized capital?

Shareholders of a company with majority voting rights can increase the authorized capital of a company.

What is the process for increasing authorized capital?

A company can increase the authorized capital by an ordinary resolution passed by shareholders. After the increase, the company needs to file a notice of increase with the ROC and pay the differential fee for the authorized capital.

Is it mandatory to allot shares after increasing authorized capital?

There is no need to allot shares on increase of authorized capital. There is no time limit for keeping the authorized capital unissued. The company can issue shares at its discretion, subject to the Companies Act and other regulations.

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