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INCREASE IN AUTHORIZED CAPITAL

Tarun Poddar (CA FINAL) (233 Points)

30 January 2010

WHAT IS THE PROCEDURE FOR INCRESING THE AUTHORIZED CAPITAL OF THE PVT AND PUBLIC COMPANY?

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4 Replies

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 30 January 2010

PROCEDURE

1. The company's Articles must contain a power to increase the authorised capital.
Otherwise Articles must be altered or special resolution
must be passed. [John Smith's Tadcaster Brewery Co Ltd (1953) 1 All ER 518]

2. Amount of increase will be decided, having regard to the capital already issued,
capital to be issued in the near future and ad valorem duty to be paid on the
increase in capital.

3. The section refers to an increase by 'creation of new' shares and therefore
increase in nominal value of existing shares can be done only by consolidation.

4. At the Board meeting, the proposal will be approved. The draft notice of general
meeting to be approved must specify the amount proposed to be increased. [Mac
Council v E Prill & Co Ltd (1916) 2 Ch D 57]

5. In case the shares of the company are listed, intimate the concerned stock
exchange immediately after the Board Meeting of the proposed increase in the
capital. [Clause 22(c) of the Listing Agreement]

6. A general meeting will be convened after issuing written notice in writing atleast
21 days before the date of the meeting alongwith explanatory statement for
passing:
(a) Ordinary resolution relating to increase of capital.
(b) Special resolution altering the capital clause in the Memorandum.
(c) Special resolution relating to consequential alteration of Articles.

7. The resolutions may be passed at the same meeting. [North Cheshire Brewery
Co., Re (1920) WN 149]

8. The effect of the resolution under the section is the increase in share capital
simpliciter. [Shree Gopal Paper Mills Ltd v CIT AIR 1970 SC 1750: (1970) 77
ITR 543 (SC)]

9. In case of a listed company:—
♦ forward three copies of the notice sent to the shareholders to the stock
exchanges where securities of company are listed.
♦ file six copies (one of which will be certified) of such amendments to the
stock exchanges as soon as they are adopted by the company in general
meeting.
♦ forward promptly a copy of the proceedings of the general meeting to the
stock exchanges.

10. File a special resolution passed by the company in e-Form 23 electronically
along with a certified copy of the altered MOA & AOA and explanatory
statement sent to the members within 30 days from the date of such resolution,
with the Registrar.

11. Where the Memorandum does not prohibit, the increased capital may consist of
preference shares. [Andrews v Gas Meter Co. (1897) 1 Ch D 361]

12. E-Form 5 which shall be duly stamped as per the Stamp Act of the concerning
State, where the Registered office of the company is situated. Stamped original
copy shall be simultaneously delivered at the Registrar office physically. but if stamp duty is paid online through MCA2, then there is no need to submit physical copy of form5 & altered MOA/AOA.

13. On receipt of e-Form 5 & 23 alongwith the altered Memorandum and Articles
the Registrar shall register these documents and the altered Memorandum and
Articles shall be the Memorandum and Articles of Association of the company.

14. The increase will be noted in the Memorandum and Articles of Association.
[Section 40]

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