Increasing of authorised share capital

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 February 2016 Sir,
Help me on the procedure for increase in Authorised Share Capital.
Which all forms are required to be filled??

CS Divesh Goyal

CS Divesh Goyal (Expert)
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12 February 2016
ALTERATION IN AUTHORIZED CAPITAL

Every business run on finance and share capital is base finance; hence Finance is life blood of a company. Section 13 of Companies Act 2013 regulates the process of amendment in Memorandum of Association is applicable to all companies. All clauses of Memorandum except Capital clause can be altered by following the provisions of Section 13 of Companies Act, 2013 by passing special resolution.

Under Companies Act, 2013, the process of Increase in Authorize Capital is governed by Section 61 read with Section-13 and 64 of Companies Act, 2013.

Where any communication or publication of a company contains a statement of the amount of the authorize capital of the company, it shall also contain a statement in an equally prominent position and in equally conspicuous characters of the amount of the capital which has been subscribed and the amount paid – up.

Section 61 (1) of the act states that a limited company having a share capital, if so authorized by its articles, alter the conditions of its memorandum to increase its share capital by such amount as it thinks expedient by issuing new shares.

Furthermore section 14(1) of the act states that the articles of company can be altered by a special resolution if so allowed by the memorandum of the company.

STEPS OF INCEREASE IN AUTHORIZE CAPITAL (Section- 13 & 61)
There are two way of Increase in Authorize Capital:
1) If there is no requirement to Alteration in Article of Association.
2) If there is require to Alter Article of Association.

1) - IF THERE IS NO REQUIREMENT OF ALTERATION IN ARTICLE OF ASSOCIATION

First Check is there any provisions in Article of Association regarding increase in capital, if there is provision in AOA then no need for alteration in Article of Association.

STEP: I
Call Meeting of Board Director:
 Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting.
 Attach Agenda
 Notes to Agenda
 Draft Resolution

STEP: II
Hold the Board Meeting:
At the Board meeting, the given resolutions must be passed:-
 Get Approval to Increase in the authorized capital and recommending the proposal for members' consideration by way of Ordinary Resolution.
 Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.
 Approval of Notice of EGM.
 Provisions of the Section 101 of the Companies Act 2013 provides for issue of notice of EGM in writing to below mentions atleast 21 days before the actual date of the EGM :
 All the Directors.
 Members
 Auditors of Company
 The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.
 Authorize Director & Company Secretary of company to issue notice of EGM.
 Notice of EGM along with Route map and Attendance Slip.
STEP-III
Hold Extra Ordinary general Meeting:
 Check the Quorum.
 Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).
 Pass the Ordinary Resolution (u/s- 61(1)(a) of the companies act, 2013) for change in Capital Clause of Memorandum of Association of Company.
 Approval of Alteration in MOA & AOA.
STEP-IV
FILING AND FEES:
I) File FORM NO. SH-7 (Section-64(1) read with Rule 15 of The Companies (Share Capital and Debentures) Rules, 2014 )within 30 days of passing the Ordinary resolution, along with given documents:-

 Certified True Copies of the Ordinary Resolutions along with explanatory statement;
 Copy of the Notice of meeting send to members along with all the annexure;
 A printed copy of the Altered Memorandum of Association and Article of Association.
 Minutes of General Meeting.

STEP-V
Concerned Registrar of Companies (ROC) will check the E-form and attached the documents and will approve the increase in Authorize capital of company.

2- IF THERE IS REQUIREMENT OF ALTERATION IN ARTICLE OF ASSOCIATION

First Check is there any provisions in Article of Association regarding increase in capital, if there is no provision in AOA then first requires alteration in Article of Association.

STEP: I
CALL BOARD MEETING:
 Issue Notice of Board Meeting to all the directors of company at least 7 days before the date of Board Meeting.
 Attach Agenda
 Notes to Agenda
 Draft Resolution

STEP: II
HOLD BOARD MEETING

At the Board meeting, the given resolutions must be passed:-
 Get Approval for alteration in Article of Association
 Get Approval to Increase in the authorized capital and recommending the proposal for members' consideration by way of ordinary resolution.
 Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.
 Provisions of the Section 101 of the Companies Act 2013 provides for issue of notice of EGM in writing to below mentions atleast 21 days before the actual date of the EGM :
 All the Directors.
 Members
 Auditors of Company
 The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.
 Authorize Director & Company Secretary of company to issue notice of EGM.
 Notice of EGM along with Route map and Attendance Slip.

STEP-III
HOLD A GENERAL MEETING:

 Check the Quorum.
 Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).
 Pass the Special Resolution for change in Capital Clause of Article of Association and Memorandum of Association of Company.
 Approval of Alteration in MOA & AOA.

STEP-IV
FILING AND FEES:
I) File FORM NO. MGT-14 (Filing of Resolutions and agreements to the Registrar under section 117) with the Registrar along with the requisite filing within 30 days of passing the special resolution, along with given documents:-

 Certified True Copies of the Special Resolutions along with explanatory statement;
 Copy of the Notice of meeting send to members along with all the annexure;
 A printed copy of the Altered Article of Association and Memorandum of Association.
2) File FORM NO. SH-7 (Section-64(1) read with Rule 15 of The Companies (Share Capital and Debentures) Rules, 2014 )within 30 days of passing the Ordinary resolution, along with given documents:-

 Certified True Copies of the Ordinary Resolutions along with explanatory statement;
 Copy of the Notice of meeting send to members along with all the annexure;
 A printed copy of the Altered Memorandum of Association and Article of Association.
 Minutes of General Meeting.

STEP-V
Concerned Registrar of Companies (ROC) will check the E-form and attached the documents and will approve the increase in Authorize capital of company.

SAMPLE BOARD RESOLUTION FOR: 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 made 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.

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 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, 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:

INCREASE IN AUTHORISED SHARE CAPITAL AT GENERAL MEETING
SPECIAL BUSINESS

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.

Alteration in the Capital Clause of Memorandum of Association

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 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 there under, the consent of the members of the Company be and is hereby accorded 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.”

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