Growth would need more capital too !!
Capital is genesis for increase in size of business !!
Every business eventually requires additional money to keep running. These funds may be required both now and in the future. One option for covering an urgent need is to take out loans and advances. But, the company will require additional funding for the run. A Private Limited Company can achieve this by increasing its authorised capital. Since the Private Limited Corporation is governed and regulated by the Company Act, it is crucial to follow the Act's guidelines while making changes to the structure.
When the Private Limited Corporation is registered, the authorised and paid-up capital is specified in the firm's MOA. As a result, the corporation is permitted to issue more shares up to the MOA's specified authorised capital. If the company intends to issue more shares than the predetermined maximum, changes to the MOA must be made.
What kind of capital is allowed?
"Authorized Capital" is defined as the capital that is authorised by the company's memorandum to be the maximum amount of the share capital of the company in Section 2(8) of the Companies Act, 2013, which was passed in 2013.
The business can grow up to the permissible capital for the company. If a firm has to invest more money than it did at the beginning of the business to grow, it must increase the authorised capital by employing the procedures outlined in this article.
approved increase in share capital
Before issuing additional equity shares and raising the paid-up capital, a corporation might need to increase the authorised share capital. The total amount of shares a corporation is permitted to issue is known as authorised share capital. The total value of the issued shares of the corporation makes up the paid-up capital.
The approved capital is not exceeded by the paid-up capital. Hence, if a corporation with Rs. 10 lakh in authorised capital and Rs. 10 lakh in paid-up capital wants to add more shareholders, it can do so by:
New shares are issued while increasing the authorised share capital, or (or)
shares are transferred from current shareholders to new shareholders.
In most circumstances, the authorised capital increases following the issuance of new shares. Contact our consultants at firstname.lastname@example.org if you need help raising the permitted share capital.
How can the company's authorised share capital be increased?
Check the company's AOA.
It is vital to check the AOA to make sure that there is a provision in the Articles of Association related to the expansion of the authorised share capital before beginning the procedures for doing so. The company must first make amendments to the AOA of the company if there is no such provision.
Most AOAs include language allowing for an increase in the company's authorised share capital.
Set a Board Meeting Date
To enhance the company's authorised share capital, a Board meeting must be called and notification given to the director. The Board of Directors must give its blessing at the meeting of the Board before the authorised share capital can be increased.
Following going through the entire process, a date should be set for an Extraordinary General Meeting to be held in order to get shareholder approval for raising the authorised share capital and amending the Company's Memorandum of Association.
Once the Board of Directors has given its blessing, the company secretary can finally notify the shareholders of the next extraordinary general meeting. The notice of the extraordinary general meeting should be distributed to all of the company's shareholders, directors, and auditors based on the approval.
Additional General Meeting
On the time, date, and location specified in the notification, hold the extraordinary general meeting and get the shareholders' consent to increase the authorised share capital.
An ordinary resolution must be passed by the shareholders in order for the authorised capital to be increased.
submit ROC forms
The corporation must file Form SH7 within 30 days of the passing of the ordinary resolution following its adoption at the Extraordinary General Meeting. The documents listed below must be submitted, together with the specified government charge for the authorised capital.
regarding the Extraordinary General Meeting's notice
Genuine, authorised copies of the standard resolution
The revised Memorandum of Association, which shows the increased authorised capital (Which depicts the higher authorised capital)
The registrar would approve the filing and enhance the authorised share capital of the business if the procedure outlined in the Companies Act and the Companies Regulations was followed. The MCA portal will show the new authorised share capital.
Distribution of Shares
The paid-up share capital of the corporation may be raised after the authorised share capital is raised by issuing additional equity shares.