company law

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GAURAV MALIK

GAURAV MALIK (Querist)
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12 June 2008 what is the detailed procedure of increasing the authorized capital of the private company?

PC-www.bharadwajinstitute.com

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19 June 2008 The directors may exercise the powers granted to them pursuant to s80 CA85 to issue shares in the company provided that the company has sufficient authorised share capital. The authorised share capital will be stated in the Memorandum of Association of the company.

A company limited by shares or a company limited by guarantee and having a share capital, if so authorised by its Articles, may alter its share capital by increasing its share capital by creating new shares of such amount as it thinks expedient (s121 CA 85). Regulation 32 of the 1985 Table A authorises the company to increase its share capital by ordinary resolution of the members.

Notification of an increase in authorised share capital must be given to the Registrar of Companies on Form 123 within 15 days after the passing of the resolution authorising the increase. Form 123 must be accompanied by a copy of the resolution authorising the increase (s123 CA 85)

In some instances, a company will want to increase it’s authorised share capital by the creation of a new class of shares. The rights attached to the new class of shares can be:

(i) included in the ordinary resolution authorising the increase; or
(ii) attached by a special resolution; or
(iii) attached by a special resolution amending the Articles of Association; or
(iv) by some other means.

If the rights are included in the resolution authorising the increase or attached by a special resolution, then a copy of the relevant resolution together with form 123 will need to be filed with the Registrar of Companies. Where the rights are attached to a new class of shares other than by the passing of a resolution or agreement notice of the particulars of the rights attached to the new class of shares will need to be given on form 128(1).

Notes: normally the share rights are attached by a special resolution amending the Articles of Association. Therefore, the precedents supplied within Blueprint are drafted accordingly. If the rights attached to a new class of shares is by another means the precedents will need to be amended accordingly. In addition, if the company has shares other than ordinary shares in issue and a further class of shares is being created it would be advisable to check that creation of the new class of shares would not constitute a variation of class rights under the rights of other shares currently in issue or that class consent to the creation of the new shares is not required (e.g. if company has preference shares in issue and it is proposing to create a new class of preference shares ranking in priority to the existing preference shares).