Increase in authorised capital

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kantijain (Querist)
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08 October 2010 Dear expert friends,

Considering your expertise and experience, will like to know following:

1) What are the factors a pvt limited co must keep in mind while increasing its authorised capital &

2) What is an adequate authorised cap as per you.

Along with increase in authorised capital, many other provisions/factors are attracted, for eg;

1) Stamp duty
2) Applicability of Caro
3) Appointment of Co secretary
4) shift from Small & Medium Companies to non-SMC
5) applicability of Accounting standards
6) Losing its identity as pvt co, etc

CA Sanat Pyne

CA Sanat Pyne (Expert)
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08 October 2010 Procedure For Alteration Of Share Capital Including
Increase Of Authorised Share Capital
Act: The Companies Act, 1956
Relevant Section: 31, 40 and 94(1)
1. Preliminary
I) The procedure for alteration of share capital
including increase of authorised share capital
should not contravene the provisions of Section 31
, Section 40 , Section 94(1) of The Companies Act,
1956.
II) The memorandum of every company having a
share capital must state the authorised share capital
with which the company is incorporated.
III) A limited company having a share capital, may,
only if so authorised by its articles, alter its share
capital in any of the following ways:-
a. increase its share capital by issuing new
shares;
b. consolidate and divide all or any of its share
capital into shares of larger amount than its
existing shares;
c. convert all or any of its fully paid up shares
into stock, and reconvert that stock into fully
paid up shares of any denomination;
d. sub-divide its shares, or any of them, into
shares of smaller amount than is fixed by the
memorandum, so that the proportion between
the amount paid and the amount, if any, unpaid
on each reduced share shall be the same as it
was in the case of the share from which the
reduced share is derived;
e. cancel shares which, at the date of the passing
of the resolution in that behalf, have not been
taken or agreed to be taken by any person, and
diminish the amount of its share capital by the
amount of the shares so cancelled.
IV) If articles do not contain an express provision for
alteration, first take necessary steps to amend the
articles so as to insert a suitable provision therein.
V) Convene a Board Meeting for the purpose of
passing resolution for the alteration of share
capital.
2. Application
I) At the Board meeting, the given decisions must be
taken:-
a. approving the proposal for alteration of share
capital and consequential alteration of the
memorandum;
b. convening a general meeting for passing an
ordinary resolution in terms of section 94 and a
special resolution if the alteration of share capital calls
for alteration of articles;
c. fixing a date, place and time of the meeting and to
approve the draft notice of the general meeting and
explanatory statement; and
d. authorising a Company Secretary (or a director or
other officer) of the company to issue the notice to
the members.
II) In the case of listed company, send 3 copies of the notice
of the general meeting to all the Stock Exchanges on
which the company's securities are listed, at the same time
when notice is sent to the members.
III) Convene a General Meeting to pass a resolution
ordinary/special resolution for the alteration of share
capital and the memorandum and articles of the company.
IV) Get the FORM NO. 5 duly stamped or franked from the
concerned Stamp authority for the stamp duty paid for
increase in the authorised share capital, in accordance with
the Stamp Act of the State in which the registered office
of the company is situated.
3. Filing And Fees
I) File FORM NO. 23 with Registrar of Companies
alongwith the requisite filing fees, alongwith the certified
copy of the a special resolution and the explanatory
statement passed at the general meeting, within 30 day of
the conclusion of the meeting.
II) File FORM NO. 5, duly stamped, with Registrar of
Companies alongwith the requisite filing fees, in respect
of increase of the authorised share capital alongwith given
documents
a. certified copy of the special resolution passed at the
general meeting; and
b. demand draft or challan for the fees paid on the
increase of the authorised share capital and the normal
filing fee.

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CA Sanat Pyne

CA Sanat Pyne (Expert)
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08 October 2010 YOU CAN VISIT ALSO
https://www.caclubindia.com/experts/increase-of-authorised-capital-443255.asp

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Ankur Garg

Ankur Garg (Expert)
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08 October 2010 Increase in authorised capital has nothing to do with CARO applicability and appointment of CS. The same is dependent on the paid up capital of the company.

Further on Increase in authorised capital you have to pay stamp duty to ROC along with ROC fee.

The can incorporate a private company with auth. Capital of Rs. 100 crore so the same is not going to lose its identity due to higher AC.

Hope am able to bring some clarity.

kantijain

kantijain (Querist)
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08 October 2010 In connection with the above question & clarification, some more clarification is required:

1. whether Security (share) premium is to be considered as paid up capital for the purpose of caro & CS appointment.

2. also as per the companies act, 1956, the security premium is a restricted reserve/fund.

Sec.78 restrict the usage of Securities Premium only for the following purposes---
* Can be used to issue fully paid up bonus shares and such premium amount used should be realised in cash.
* To write off preliminary exp. of the company.
*To write off any exp of or commission, discount allowed on any issue of shares or debenture.
* To provide for premium on redemption of shares or debentures.

Whether we can use security premium for acquisition of other company or expansion of the company, if so how??? if not how are so many listed company utilising the share premium collected at the time of IPO. whether it will not result in blockage of funds.......???