Increase in Authorized Share Capital: A Complete Guide

Increase in Authorized Share Capital refers to the process of raising the maximum share capital a company is permitted to issue, as stated in its Memorandum of Association. It's most relevant for companies planning to issue more shares than their current authorized capital allows, and is handled through the Ministry of Corporate Affairs (MCA).

Who This Applies To

If your business falls under this category, understanding the basics of Increase in Authorized Share Capital early on can save time and avoid compliance issues down the line. This guide covers what you need to know, what to prepare, and how the process typically works.

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
• Applicable government fee for the increased capital
• Updated statutory registers

How the Process Works

1. Pass a board resolution proposing the increase
2. Obtain shareholder approval at a general meeting
3. File the relevant form with the MCA along with fees
4. Update the Memorandum of Association and statutory registers

Common Pitfalls to Watch For

• Trying to issue shares before increasing authorized capital, when required
• Underestimating the government fee applicable to the increased capital

These are avoidable with the right preparation and a clear understanding of the requirements upfront.

Frequently Asked Questions

What's the difference between authorized and paid-up capital?
Authorized capital is the maximum a company can issue; paid-up capital is what's actually issued and paid for by shareholders.

Is shareholder approval always required?
Yes, increasing authorized capital typically requires shareholder approval, not just board approval.