An authorized capital means such capital as is authorized by the memorandum of the company to be the maximum amount of share capital up to which a company can raise its funds by way of share capital. As per Companies Act, 2013 Authorized Capital or nominal capital means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.
Authorized Capital is mentioned in the Capital Clause of the Memorandum of Association. So if you want to increase the Authorized Capital then you have to Alter Memorandum of Association of the Company. It means you have to follow provisions regarding Alteration of Memorandum of Association.
However, unlike alteration, any other clause in the Memorandum of Association, an increase in Authorized Share Capital does not require a special resolution, only Ordinary Resolution is sufficient.
Procedure of Increase in Authorized Capital:
Convene board meeting discuss following matters:
- To get the Director's approval for an increase in Authorized Capital.
- Fix date, time, and place for holding Extra-ordinary General meeting (EGM) to get an approval of members by way of Ordinary Resolution, for an increase in Authorized Capital and alteration of Memorandum of Association.
- To approve the notice of EGM along with an Explanatory Statement to be attached to the notice of the General Meeting.
- To approve the Director or Company Secretary to furnish Notice of the Extra-ordinary General meeting (EGM).
- To Authorize the Directors of Company to make Application with ROC for application for change of Object clause and to prepare a new set of amended Memorandum of the Company.
- Prepare minutes of such a Board Meeting.
Issue Notice of the Extra-ordinary General meeting (EOGM) to all Members, Directors, the Auditors and to all other persons entitled to such notice.
Convene Extra-Ordinary General Meeting of the members of the Company at place & time mentioned in Notice to transact following businesses.
- Increase in Authorized Capital, subject to the approval of ROC.
- Alteration of the Capital Clause of the Memorandum of Association of the Company.
File necessary e-Forms along with attachments with Registrar of Companies.
Form SH-7 for filling special resolution with following attachments.
- Altered Memorandum of Association.
- Notice of General Meeting.
- Copy of Ordinary Resolution.
Before starting the process of increase in authorized capital it is important to check whether the Articles of Association has enabling provision to allow company to increase its authorized capital.
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