A company may need to increase its authorised share capital when it plans to issue additional equity shares or expand its ownership base. Authorised share capital represents the maximum limit of shares a company is legally permitted to issue, while paid-up capital refers to the actual value of shares that have already been issued to shareholders.

Importantly, a company cannot issue shares beyond its authorised capital limit. Therefore, when expansion is required, the authorised capital must be increased first.

For example, if a company has an authorised and paid-up capital of ₹10 lakhs and wants to bring in new investors, it must either increase its authorised capital or transfer existing shares. In most cases, companies prefer increasing authorised capital to issue fresh shares.

Check Articles of Association (AOA)

Before initiating the process, it is important to review the company’s Articles of Association (AOA). The AOA must contain a provision allowing the company to increase its authorised share capital.

• If such a clause exists, the process can proceed directly

• If not, the AOA must first be amended through shareholder approval

In most companies, the AOA already includes enabling provisions for capital increase.

Board Meeting Approval

The process begins with a properly convened Board Meeting.

At the meeting, the Board of Directors:

• Approves the proposal to increase authorised share capital

• Fixes the date, time, and venue for an Extraordinary General Meeting (EGM)

• Authorises issuance of notice for the EGM

• Approves draft resolutions and supporting documents

Once approved, notice of the EGM is circulated to all shareholders, directors, and auditors.

Extraordinary General Meeting (EGM)

An EGM is held on the scheduled date to obtain shareholder approval.

During the meeting:

• Shareholders discuss and approve the increase in authorised share capital

• An ordinary resolution is passed for the approval

• Necessary amendments are made to the Memorandum of Association (MOA)

Shareholder approval is mandatory before proceeding further.

Filing with ROC (Form SH-7)

After passing the resolution, the company must file Form SH-7 with the Registrar of Companies (ROC) within 30 days.

The following documents are typically required:

• Notice of EGM

• Certified copy of the ordinary resolution

• Updated Memorandum of Association (reflecting new capital structure)

• Relevant supporting documents as required by MCA

Once verified and approved, the ROC updates the company’s authorised capital on the MCA portal.

Post Increase – Issuance of Shares

After successfully increasing the authorised share capital, the company becomes eligible to issue fresh equity shares.

This allows the company to:

• Bring in new investors

• Raise additional funds

• Expand business operations

• Strengthen capital structure

Importance of Increasing Authorised Capital

Increasing authorised share capital is essential for:

• Fundraising and business expansion

• Issuing shares to new shareholders

• Attracting investors or strategic partners

• Supporting mergers or restructuring plans

Conclusion

Increasing authorised share capital is a structured legal process under the Companies Act, 2013 that enables a company to expand its funding capacity. Proper approvals, documentation, and timely ROC filings ensure smooth compliance and uninterrupted business growth.