Issued capital
This query is : Resolved
01 October 2015
we want to increase our issued share capital then what procedure should be followed under Companies Act/ROC.
In which form we give intimation to ROC?
Is it compulsory to increase authorized capital when we increase issued capital?
If any board resolution pass for it then please send me a copy of it.
In which form we give intimation to ROC?
Is it compulsory to increase authorized capital when we increase issued capital?
If any board resolution pass for it then please send me a copy of it.
01 October 2015
As per my understanding procedure for Increase in Authorize share Capital is one of the most frequently searched topics by professionals. An attempt has been made from my side to unlock the provisions of Companies Act, 2013 related to Increase in Authorize share Capital along with requisite secretarial practice w.r.t. to sample Board and Shareholders’ resolutions.
Under Companies Act, 2013, the process of Increase in Authorise Capital is governed by Section 61 read with section 13 and 64 of Companies Act, 2013. Procedure in this regard is given below:
Procedure for Increase in Authorize share Capital
1. Authorisation in Article is must for Increase: For Increase in Authorise Share Capital, the company has to make sure that its Articles of Association contain a provision authorising it to increase its authorized share capital. Reason being Section 61 of the Companies Act, 2013, mandates that for increasing the Authorised share capital, authorization in Articles of Association is a pre-condition.
In other words Company has to make sure that its Articles of Association contain a provision authorising it to increase its authorised share capital.
So first check whether there is enabling provision in the Articles of Association regarding increase in authorised share capital.
If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the Authorised share capital of the Company.
2. Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. Main agenda for this Board meeting would be:
a. To Get in-principal approval of Directors for Increase in authorised share Capital;
b. Fix date, time and place for holding Extra-ordinary General meeting (EGM) to get approval of shareholders, by way of Ordinary Resolution, for amendment in authorised share Capital clause of Memorandum of Association. This amendment in authorised share Capital clause of Memorandum of Association shall be in accordance with the requirement of section 61 of the Companies Act, 2013;
c. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;
d. To authorise the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the board under clause 2(c) mentioned above.
3. Issue Notice of the Extra-ordinary General meeting (EGM) to all Members, Directors and the Auditors of the company in accordance with the provisions of Section 101 of the Companies Act, 2013;
4. Holding of General Meeting: Hold the Extra-ordinary General meeting (EGM) on due date and pass the necessary Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, for increase in authorize share capital of the Company.
5. ROC Form filing: File form SH-7 within 30 days of passing of Ordinary Resolution with the concerned Registrar of Companies, with prescribed fees and along with following attachments as desired by section 64:
a. Notice of EGM;
b. Certified True copy of Ordinary Resolution;
c. Altered Memorandum of Association.
6. Concerned Registrar of Companies (ROC) will check the E-forms and attached documents and will approve the increase in authorize share capital.
Notice to be given to Registrar for alteration of share capital.
As per section 64 of the Companies Act, 2013, where a company alters its share capital for increase in authorised share capital in accordance with sub-section (1) of section 61, the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of such increase along with a copy of altered Memorandum.
No need to pass Special Resolution for increase in authorised share capital
Some professionals are of the view that for increase in authorised share capital Special Resolution is to be passed, since amendment in Memorandum of Association can be done by way of passing Special Resolution under section 13 of the Companies Act, 2013.
Kindly appreciate amendment in Memorandum of Association by way of passing Special Resolution is required only when there is a change in particular clause of MOA like alteration in name clause or alteration in registered office clause, as envisaged in Section 13.
Amendment in capital clause of Memorandum of Association for the purpose of increase in authorised share capital is exclusively governed by Section 61of the Companies Act, 2013 and section 61 is silent about the nature of shareholders’ resolution. So in the above scenario an Ordinary Resolution would be enough for increase in authorised share capital.
SECRETARIAL PRACTICE / DRAFTING
Sample Board Resolution for:
A. Increase in Authorised Share Capital
“RESOLVED THAT pursuant to the provisions of Section 61 and 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
B. Alteration in the Capital Clause of Memorandum of Association
“RESOLVED THAT pursuant to the provisions of Section 13, 61 and 64 and other applicable provisions of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed thereunder, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, for substituting Clause V of the Memorandum of Association of the Company with the following clause.
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”
Sample Shareholders’ Resolution to be passed in the General Meeting:
a. Increase in Authorised Share Capital
SPECIAL BUSINESS
1. To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 61 read with Section 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the members of the Company be and is hereby accorded to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
RESOLVED FURTHER THAT the Memorandum of Association of the Company be altered in the following manner i.e. existing Clause V of the Memorandum of Association be deleted and the same be substituted with the following new clause as Clause V:
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”
RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board of Directors of the Company (hereinafter referred to as “Board” which term shall include a Committee thereof authorized for the purpose) be and is hereby authorized to take all such steps and actions and give such directions as may be in its absolute discretion deemed necessary and to settle any question that may arise in this regard, without being required to seek any further consent or approval of the shareholders or otherwise and that the shareholders shall be deemed to have given their approval thereto expressly by the authority of this resolution.”
Disclaimer: This write up is intended to start academic discussion on few significant interpretations under Companies Act, 2013. It is not intended to be a professional advice and should not be relied upon for real time professional facts. Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.
I am very hopeful that this write up would be of some help to understand the concepts in new Companies Act, 2013.
Under Companies Act, 2013, the process of Increase in Authorise Capital is governed by Section 61 read with section 13 and 64 of Companies Act, 2013. Procedure in this regard is given below:
Procedure for Increase in Authorize share Capital
1. Authorisation in Article is must for Increase: For Increase in Authorise Share Capital, the company has to make sure that its Articles of Association contain a provision authorising it to increase its authorized share capital. Reason being Section 61 of the Companies Act, 2013, mandates that for increasing the Authorised share capital, authorization in Articles of Association is a pre-condition.
In other words Company has to make sure that its Articles of Association contain a provision authorising it to increase its authorised share capital.
So first check whether there is enabling provision in the Articles of Association regarding increase in authorised share capital.
If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the Authorised share capital of the Company.
2. Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. Main agenda for this Board meeting would be:
a. To Get in-principal approval of Directors for Increase in authorised share Capital;
b. Fix date, time and place for holding Extra-ordinary General meeting (EGM) to get approval of shareholders, by way of Ordinary Resolution, for amendment in authorised share Capital clause of Memorandum of Association. This amendment in authorised share Capital clause of Memorandum of Association shall be in accordance with the requirement of section 61 of the Companies Act, 2013;
c. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;
d. To authorise the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the board under clause 2(c) mentioned above.
3. Issue Notice of the Extra-ordinary General meeting (EGM) to all Members, Directors and the Auditors of the company in accordance with the provisions of Section 101 of the Companies Act, 2013;
4. Holding of General Meeting: Hold the Extra-ordinary General meeting (EGM) on due date and pass the necessary Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, for increase in authorize share capital of the Company.
5. ROC Form filing: File form SH-7 within 30 days of passing of Ordinary Resolution with the concerned Registrar of Companies, with prescribed fees and along with following attachments as desired by section 64:
a. Notice of EGM;
b. Certified True copy of Ordinary Resolution;
c. Altered Memorandum of Association.
6. Concerned Registrar of Companies (ROC) will check the E-forms and attached documents and will approve the increase in authorize share capital.
Notice to be given to Registrar for alteration of share capital.
As per section 64 of the Companies Act, 2013, where a company alters its share capital for increase in authorised share capital in accordance with sub-section (1) of section 61, the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of such increase along with a copy of altered Memorandum.
No need to pass Special Resolution for increase in authorised share capital
Some professionals are of the view that for increase in authorised share capital Special Resolution is to be passed, since amendment in Memorandum of Association can be done by way of passing Special Resolution under section 13 of the Companies Act, 2013.
Kindly appreciate amendment in Memorandum of Association by way of passing Special Resolution is required only when there is a change in particular clause of MOA like alteration in name clause or alteration in registered office clause, as envisaged in Section 13.
Amendment in capital clause of Memorandum of Association for the purpose of increase in authorised share capital is exclusively governed by Section 61of the Companies Act, 2013 and section 61 is silent about the nature of shareholders’ resolution. So in the above scenario an Ordinary Resolution would be enough for increase in authorised share capital.
SECRETARIAL PRACTICE / DRAFTING
Sample Board Resolution for:
A. Increase in Authorised Share Capital
“RESOLVED THAT pursuant to the provisions of Section 61 and 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
B. Alteration in the Capital Clause of Memorandum of Association
“RESOLVED THAT pursuant to the provisions of Section 13, 61 and 64 and other applicable provisions of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed thereunder, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, for substituting Clause V of the Memorandum of Association of the Company with the following clause.
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”
Sample Shareholders’ Resolution to be passed in the General Meeting:
a. Increase in Authorised Share Capital
SPECIAL BUSINESS
1. To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 61 read with Section 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the members of the Company be and is hereby accorded to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
RESOLVED FURTHER THAT the Memorandum of Association of the Company be altered in the following manner i.e. existing Clause V of the Memorandum of Association be deleted and the same be substituted with the following new clause as Clause V:
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”
RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board of Directors of the Company (hereinafter referred to as “Board” which term shall include a Committee thereof authorized for the purpose) be and is hereby authorized to take all such steps and actions and give such directions as may be in its absolute discretion deemed necessary and to settle any question that may arise in this regard, without being required to seek any further consent or approval of the shareholders or otherwise and that the shareholders shall be deemed to have given their approval thereto expressly by the authority of this resolution.”
Disclaimer: This write up is intended to start academic discussion on few significant interpretations under Companies Act, 2013. It is not intended to be a professional advice and should not be relied upon for real time professional facts. Readers are advised to refer relevant provision of law before applying or accepting any of the point mentioned above. Author accepts no responsibility whatsoever and will not be liable for any losses, claims or damages which may arise because of the contents of this write up.
I am very hopeful that this write up would be of some help to understand the concepts in new Companies Act, 2013.
02 October 2015
Thank u sir, but my question is what procedure for increase issued capital?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Transferring CA articleship from old to new scheme of education and training
- GST Refund SB005 Error
- Notice u/s.148- Asstt.Year 2015-2016
- Invoice Numbers WROGLY ENTERED
- TDS on purchase of value vouchers for employees ?
- PAYMENT TO OPEN AI AND ENVATO ELEMENT
- Issue of gst e invoice
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
Trending Online Classes
-
Excel Mastery Program
CA Rishabh Pugalia
CAclubindia
