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Increase Your Authorized Capital
A company Needs funds for short or long term requirements. It can issue new shares and infuse more capital to increase its authorized capital. Authorized capital is the maximum no of share capital that a company can issue to its shareholders.
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How to Increase Your Authorized Share Capital?
Increasing authorized share capital helps bring in more capital! To increase the authorized capital, you need to pass an appropriate Board resolution and amend the capital clause of the Memorandum of Association (MoA).
The Essentials of Authorized Capital
It is the authorized capital of a private company that determines the maximum number of shares it can issue. Most start-ups begin with the minimum authorised capital of Rs. 1 lakh, which becomes too little as the business grows. To issue new shares or to raise the Authorised Capital, the capital clause of the Memorandum of Association is amended by passing a special resolution by the board.
The Benefits of Increasing Authorised Capital
Increases Share Capital
A company can only raise its share capital beyond what it is prescribed in its MOA (Memorandum of Association) if authorised capital. Hence, increasing authorized capital has an incremental effect on the overall company share capital.
Enhances Borrowing Capacity
With the increase in share capital, the company’s overall net worth also increases. This further enhances the borrowing capacity of the company.
Checklist For Increasing Authorised Capital
- Check provisions of AoA (Articles of Association) to increase Authorised Share Capital.
- If AoA does not permit increase, then AoA must be modified as per section 14 of the companies act 2013.
- Issue notice for calling EOBM (Extraordinary Board Meeting) to modify AoA, for approving the increase in authorized share capital.
- Issue notice at least seven days before the meeting.
How To Issue New Shares To Increase Authorised Share Capital?
To Existing Promoters
To increase the authorised capital and to issue new shares to existing promoters the following steps are required. A board meeting is called for all shareholders, and Form PAS-3 is filed with the Registrar of Companies (RoC) to intimate the allotment of new shares.
To New Shareholders
To issue new shares to new shareholders a valuation report is required, from a certified chartered accountant.
Documents Required to Increase Authorised Capital
The documents must be filed within 30 days after obtaining consent from boards for the share capital increase with the MCA (Ministry of Corporate Affairs). The resolution passed is notified in MGT-14 and notice of increase is filed in SH-7
- Digital Signature Certificate: A copy of a DSC from any authorized director of the company
- Memorandum of Association: A copy of the modified or the latest version of MoA
- Articles of Association: A copy of the modified or the latest version of AoA
- Certificate of Incorporation: A copy of the company’s incorporation certificate.
- PAN card: A copy of the company PAN card.
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Recent Updates
IIFCL’s Paid-up Equity Capital Increased against its Authorized Share Capital
15 Jun 2020: The Central government increased the paid-up equity capital to Rs 9,999.92 crore, for IIFCL (India Infrastructure Finance Company) against its authorized share capital of Rs. 10,000 crores. They did this by boosting IIFCL’s equity share capital by Rs. 5297.60 crores, allowing them to finance more projects with the scope for infrastructure development within the country.
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