Increase in Authorised Share Capital



What is Authorised Share Capital?

Authorised Share Capital is the broadest term used to describe a company’s capital. It is the maximum amount of the capital for which shares can be issued by the Company to its shareholders. The Authorised Share Capital can be increased anytime by following the procedure as laid down under Companies Act, 2013.


Difference between Authorised Share Capital and Paid-Up Share Capital

Authorised Share Capital Paid-Up Share Capital
Authorized share capital is the maximum value of the share that a company can issue to the shareholders. Paid up capital is the amount of money which is actually paid by the shareholders to the company.
The authorized capital is the maximum limit on the number of shares. Paid up capital has to be less than authorized capital i.e. it has to be within the limit set by authorized capital.
The authorized capital has to be stated in the Capital clause of the MOA of the company. The paid up capital is also required to be stated in the capital clause of MOA.
If the company wants to increase the authorized capital then the procedure as provided above by the Companies Act has to be followed. Paid up capital can be increased by the issue of shares or private placement.

PROCEDURE

The Company first needs to check whether there is an enabling provision in the Articles of Association (AOA) of the Company.
Hold a board meeting to get an in-principal approval for increase in Authorised Share Capital and to call an Extra-Ordinary General Meeting for shareholders approval.
Hold an Extra-Ordinary General Meeting (EOGM) on the due date for increase in Authorised Share Capital.
File Form SH-7 with ROC along with the government fees.