Increase Authorized Capital – Complete Details

What is Authorized Capital?

Authorized Capital (also called Nominal Capital) is the maximum amount of share capital that a company is legally allowed to issue to its shareholders, as mentioned in its Memorandum of Association (MOA).

A company cannot issue shares beyond its authorized capital. If more funds are required, the authorized capital must be increased first.

What is Increase in Authorized Capital?

Increase in Authorized Capital means raising the maximum share capital limit of a company by altering its Capital Clause in the MOA, in accordance with the Companies Act, 2013.

When is Increase in Authorized Capital Required?

A company needs to increase its authorized capital when:

• Issuing new shares

• Bringing in new investors

• Raising additional funds

• Converting loans into equity

• Issuing shares during funding rounds

• All existing authorized capital has already been subscribed

Legal Provisions (Companies Act, 2013)

• Section 61(1)(a) – Increase in authorized share capital

• Section 13 – Alteration of Memorandum of Association

• Rule 15 of Companies (Incorporation) Rules, 2014

Pre-Requisites for Increasing Authorized Capital

✔ The company’s Articles of Association (AOA) must authorize the increase
✔ If not authorized, AOA must be altered first
✔ Approval of shareholders is mandatory
✔ ROC filing is compulsory

Step-by-Step Process to Increase Authorized Capital

Step 1: Check AOA

Ensure that the AOA allows increase in authorized capital.
If not, alter AOA by passing a Special Resolution.

Step 2: Board Meeting

• Issue notice for Board Meeting

• Pass a Board Resolution to approve the increase

• Fix date for Extraordinary General Meeting (EGM)

Step 3: Shareholders’ Approval

• Conduct EGM

• Pass an Ordinary Resolution for increase in authorized capital

Step 4: ROC Filing

• File Form SH-7 with the Registrar of Companies (ROC)

• Pay additional stamp duty and ROC fees

Step 5: Update MOA

• Capital Clause of MOA is updated automatically after ROC approval

ROC Forms Required

Documents Required

• Board Resolution

• Ordinary Resolution

• Altered MOA (Capital Clause)

• Altered AOA (if applicable)

• EGM Notice & Explanatory Statement

Government Fees & Stamp Duty

• Fees depend on amount of increase in authorized capital

• ROC fees are slab-based

• Stamp duty varies from state to state

Time Required

⏱ 5–7 working days (subject to ROC approval)

Important Points to Remember

• Increase in authorized capital does not mean shares are issued

• Share issuance requires additional compliance

• ROC filing must be done within 30 days

• Non-compliance attracts penalties

Benefits of Increasing Authorized Capital

✔ Enables future fundraising
✔ Improves business scalability
✔ Allows issue of new shares
✔ Attracts investors
✔ Supports business expansion

Why Choose Filing By?

• Expert handling of ROC compliances

• End-to-end documentation

• Transparent pricing

• Quick processing

• Dedicated compliance support

Additional Important Information (Not Covered Above)

1. Difference Between Authorized Capital & Paid-Up Capital

🔹 Increasing authorized capital does not increase paid-up capital automatically.

2. Can Authorized Capital Be Increased Multiple Times?

Yes. There is no legal limit on how many times a company can increase its authorized capital, provided:

• Shareholders approve it

• ROC filings are completed

• Applicable fees are paid

3. Is Shareholder Consent Always Required?

✔ Yes, shareholder approval is mandatory.
❌ A Board Resolution alone is not sufficient.

4. Applicability for Different Company Types

🔹 LLPs do not have authorized capital.

5. Impact on Shareholding Pattern

• Increase in authorized capital does not change ownership

• Shareholding changes only when new shares are issued

6. Common Reasons for Rejection by ROC

• AOA does not allow capital increase

• Incorrect fee payment

• Wrong capital structure mentioned

• Delay in filing Form SH-7

• Resolution format not proper

7. Penalty for Non-Compliance

• Late filing attracts additional fees per day

• Maximum penalty as per ROC rules

• Delay may affect future funding or share allotment

8. Is Valuation Required?

❌ No valuation is required to increase authorized capital
✔ Valuation is required only at the time of share allotment

9. Can Authorized Capital Be Reduced Later?

✔ Yes, but:

• Requires NCLT approval

• Involves complex legal procedure

• Takes more time and cost

10. Tax Implications

• ❌ No direct tax on increasing authorized capital

• Stamp duty & ROC fees are non-refundable

• Tax implications arise only when shares are issued

11. Post-Increase Compliance Checklist

✔ Updated MOA downloaded from MCA
✔ ROC challan saved
✔ Capital structure updated in company records
✔ Ready for share allotment (if planned)

12. Best Time to Increase Authorized Capital

✔ Before funding rounds
✔ Before issuing ESOPs
✔ Before onboarding new shareholders
✔ During business expansion planning

13. Client FAQs (Short Add-On)

Q. Can authorized capital be increased online?
Yes, the entire process is 100% online through MCA portal.

Q. Is physical presence required?
No, everything is done digitally.

Q. Can foreign shareholders approve it?
Yes, approval can be given via digital consent.