Procedure for Increase in the Authorised Share Capital

Aakanksha Singhal

Aakanksha Singhal

Published on: Oct 16, 2020

Khushboo Sharma

Updated on: Dec 19, 2024

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51398

Introduction

A Limited Company having a share capital may, if so authorized by its articles, alter its memorandum in its General Meeting to increase its authorized share capital by such amount as it thinks expedient. [Section 61(1) (a)]

Applicable Provisions:

1. Section 15, 61, 64, 96, 100, 173 of Companies Act, 2013
2. Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014
3. Regulation 44 of SEBI (LODR) Regulations, 2015
4. Clauses of Secretarial Standard on Board Meeting (SS-1)
5. Clauses of Secretarial Standard on General Meeting (SS-2)

Mandatory Requirements

Company can increase its Authorized Share Capital, only if it is authorized by its Articles of Association and after obtaining approval of members by ordinary resolution. [Section 61(1)]

Following procedure is to be followed

1. Check the Article of Association of the Company
   Check whether Articles of Association of Company contain a provision authorizing it to increase its Authorized Share Capital. If there is no such provision in Articles then appropriate steps required to be taken to amend its articles to include such authorization. [Refer Procedure for Alteration of Articles].
2. Authorized Share Capital can be increased in two ways
   • By Passing of Resolution in Board Meeting, OR
   • By Passing of Resolution through Circulation
   • Convene a Meeting of Board of Directors [As per section 173 & SS-1]
     • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
     • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
     • Hold a meeting of Board of Directors and pass the necessary Board Resolution
       • to consider and approve increase of Authorized Share Capital and altering the Memorandum of Association, subject to the approval of shareholders in General Meeting.
       • to fix day, date, time and venue for holding General Meeting of the Company.
       • to approve the draft notice of General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
       • to authorize the Director or Company Secretary to sign and issue notice of the General Meeting and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.
     • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
   • Increase in Authorized Share Capital by Passing of Resolution through Circulation
     • The Chairman of the Board or in his absence, the Managing Director or in their absence, any Director other than an Interested Director shall decide that whether the approval of Board can be obtained by Resolution by Circular.
     • The draft resolution for increasing Authorized Share Capital and altering the Memorandum of Association, subject to approval of shareholders at General Meeting of the Company, together with necessary papers shall be sent to all the Directors individually on the same day by hand/ speed post/registered post/courier/e-mail/any other recognised electronic means to his email or postal address registered with the Company and in the absence of such details, to any address appearing in DIN registration details of the concerned Director.
     • The Resolution should explain all details of the proposal, the material facts which explain the meaning, scope and implications of the proposal made and its nature.
     • The Directors should respond in seven days to the Resolution.
     • If the minimum of 1/3rd Directors wants to decide the Resolution under circulation in a Board Meeting, then the Chairman should hold the Resolution by Circular under consideration at a Board Meeting.
     • The Resolution is deemed to be passed when the majority of the Directors entitled to vote approves for the Resolution.
     • Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting.
     • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
3. Convene General Meeting [Section 96, 100 and SS-2]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, and Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting on the fixed day and pass an Ordinary Resolution for increasing the Authorized Share Capital and make relevant changes in the Memorandum of Association (MOA).
   • Listed Company shall:
     • disclose the proceeding of General Meeting in respect of proposed amendments to memorandum and articles of association, in brief, to the Stock Exchange, within 12 hours* from the occurrence of the event or information, in case the event or information is emanating from within the listed entity and
     • disclose details of e-voting results in the format specified by the Board, to Stock Exchange, within 2 working days of the conclusion of General Meeting.
     *Note: In case the event or information emanates from a decision taken in a meeting of board of directors, the same shall be disclosed within 30 minutes from the closure of such meeting as against the timeline indicated above.
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
4. File Form SH-7 with the ROC [Section 64(1) & Rule 15 of Companies (Share Capital and Debentures) Rules, 2014]
   File a notice of alteration of Share Capital with the Registrar in E-Form SH-7 along with the prescribed fee within 30 days of such alteration along with the following documents
   • Certified true copy of Ordinary Resolution for increase in Authorised Share Capital
   • Altered E-MOA (linked)
   • Altered E-AOA (linked)
   • Shorter notice consent, if meeting was convened at shorter notice
   • Any other document, as may be applicable.
   Note:
   The Ministry of Corporate Affairs had notified Companies (Share Capital and Debentures) Amendment Rules, 2023 (dated: 20th January, 2023) by which the Memorandum of Association and Article of Association of Company are not required to attach separately and they are now linked with the Form Sh-7 in e-format.
5. Payment of e-Stamp Duty
   Pay the e-stamp duty on the increased amount of the Authorised Share Capital through MCA Portal, if applicable.
6. Alteration in every copy of MOA and AOA [Section 15(1)]
   Every Alteration made in the Memorandum of Association and Articles of Association of the Company shall be noted in every copy of the same.