Increase in Authorized Share Capital involves the process of raising the maximum share capital a company is permitted to issue, as stated in its Memorandum of Association. While the process itself is usually straightforward, businesses commonly run into avoidable issues along the way. Here are the mistakes we see most often, and how to steer clear of them.
Mistake 1
Trying to issue shares before increasing authorized capital, when required.
Mistake 2
Underestimating the government fee applicable to the increased capital.
Mistake 3
Not updating the Memorandum of Association after approval.
Mistake 4
Confusing authorized capital with paid-up capital.
How to Avoid These Issues
Most of these mistakes come down to preparation. Having the right documents ready — Current authorized capital as per the Memorandum of Association, Board resolution proposing the increase, Shareholder approval through a general meeting, among others — and understanding the process before you start goes a long way toward a smooth outcome with the Ministry of Corporate Affairs (MCA).
Quick Reference: What You'll Need
- Current authorized capital as per the Memorandum of Association
- Board resolution proposing the increase
- Shareholder approval through a general meeting
- Altered Memorandum of Association reflecting the new capital
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