Discover the straightforward steps to increase your company's authorized share capital in the Ministry of Corporate Affairs (MCA) and fuel your business expansion.
Overview
One effective way to achieve this is by increasing your company’s authorized share capital in MCA (Ministry of Corporate Affairs). This strategic move can provide your business with the financial flexibility it needs for growth.
Are you looking to expand your business operations and take it to the next level? In this guide, we’ll walk you through the process step by step.
What is Authorized Share Capital?
Before we dive into the process of increasing authorized share capital, let’s make sure we’re on the same page regarding what it actually means. Authorized share capital refers to the maximum value of shares a company is allowed to issue to its shareholders.
This figure is mentioned in the Memorandum of Association (MoA) incorporation. It sets a limit on the company’s potential growth because it determines how much money the company can raise through the issuance of shares.
Why Increase Authorized Share Capital?
Companies often find the need to increase their authorized share capital for several reasons:
Business Expansion: As your business grows, you may require additional funds to invest in new projects, hire more employees, or acquire assets. Increasing authorized share capital provides you with the means to do so.
Attracting Investors: A higher authorized share capital can make your company more attractive to potential investors. It signals that your company has room for growth and can accommodate new shareholders.
Compliance: In some cases, regulatory authorities may require companies to have a certain level of authorized share capital to operate in specific industries or to meet legal requirements.
Now that you understand why increasing authorized share capital is essential, let’s move on to the practical steps to do so.
Steps to Increase Authorized Share Capital in MCA
Step 1: Check Your Articles of Association (AoA)
The first step is to review your company’s Articles of Association. Your AoA should have provisions that allow for the increase of authorized share capital. If it doesn’t, you may need to amend your AoA.
Step 2: Convene a Board Meeting
Hold a board meeting to pass a resolution for increasing the authorized share capital. Ensure that you follow the procedures outlined in your AoA and the Companies Act.
Step 3: Pass a Shareholder Resolution
Once the board approves the increase, you’ll need to convene a general meeting of shareholders to pass a resolution for the same. Shareholders will vote on the proposed increase.
Step 4: File Form MGT-14 with the MCA
After receiving shareholder approval, you must file Form MGT-14 with the MCA within 30 days of passing the resolution. This form contains details of the increase in authorized share capital and is a crucial step in the process.
Step 5: Alter the MoA
After obtaining MCA approval, you’ll need to amend your Memorandum of Association to reflect the new authorized share capital. File the necessary forms and fees with the Registrar of Companies (RoC).
Step 6: Obtain RoC Approval
The RoC will review your application and, if everything is in order, approve the increase in authorized share capital. Once approved, your company can issue new shares up to the revised limit.
By following the process outlined in this guide and seeking professional assistance from experts, you can ensure a compliant increase to your company’s authorized share capital.
Frequently Asked Questions (FAQs)
How long does it take to increase authorized share capital in MCA?
The timeline can vary, but typically it takes around 2-3 months from the board meeting to the final approval from the RoC.
Is there a minimum or maximum limit for authorized share capital?
There's no fixed minimum limit, but the maximum limit is determined by the company's needs and is mentioned in the MoA during incorporation.
Can I increase authorized share capital multiple times?
Yes, you can increase it multiple times as long as you follow the necessary legal procedures and obtain shareholder and regulatory approvals each time.
The Takeaway
Increasing authorized share capital in your MCA registration is a crucial step for businesses looking to expand and raise additional funds. If you’re looking for expert guidance on company incorporation and related services, consider Vakilsearch to streamline your business journey.
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