PVT LTD COMPANY
Change in Authorized Capital
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OVERVIEW
CHANGE IN AUTHORIZED CAPITAL
The company may look to expand operations as well in terms of size, scale, and organizational structure when business starts to take up. The company may need to receive additional funding, raising its share capital, in order to realize that dream. The maximum amount of capital that is now authorized occasionally exceeds the amount of capital that is necessary. The maximum amount of capital for which the company may issue shares to the shareholders is known as the Authorized Capital.
The Authorized Capital limit is stated in the Memorandum of Association under the Capital Clause in accordance with Section 2(8) of the Companies Act of 2013. In order to issue more shares, a company may take the necessary steps to raise the authorized capital limit, but it is never permitted to issue shares in excess of the authorized capital limit.
BENEFITS
PROCESS TO CHANGE THE AUTHORIZED CAPITAL
Go through the Articles of Association carefully.
The Articles of Association include the regulations and principles for the company’s internal operations. Hence, before taking any action on the increase or decrease in the authorized capital, it is necessary to check the Articles of Organization to see if a clause permits a change in the company’s authorized capital. The procedure is made simpler if the clause is present. If the clause is absent, the Articles of Organization must first be changed per Section 14 of the Companies Act of 2013 (the “Act”). Only then can the business proceed with changing the authorized capital.
Board Meeting
- At least seven days before the meeting, a notice of the agenda must be sent to each director at their individual registered addresses.
- Shareholders and Auditors will receive notice of the extraordinary general meeting.
- Pass a Board Resolution at the Board Meeting calling for an Extraordinary General Meeting to be called and give notice in accordance with Section 101 of the Act, which allows the amended authorized capital clause in the Memorandum of Association to be put forth for approval by voting on an Ordinary Resolution. The proposed modification must adhere to the rules outlined in Section 60 of the Act.
- The shareholders must get notice of the meeting's specifics, including the agenda, date, time, and location.
- The voting procedure to be used at the Extraordinary General Meeting to pass the motion must be specified in the notice.
- A minimum of 21 days before the scheduled date of the EGM, a notice of the EGM must be given. A shorter notice time is only permitted, nevertheless, if and only if it is approved by at least 95% of the members present and eligible to vote. Electronic mode or writing method must be used to get consent.
Organizing the Special General Meeting
The issue of the increase or decrease in the share capital is brought up after the meeting has begun. After that, voting is conducted in a preset manner to decide the matter. Once the resolution has received approval and been adopted, the explanatory statement is attached, and the Authorized Capital is modified.
COMPANY'S REGISTRAR
FILING WITH THE COMPANY'S REGISTRAR
A firm must submit Form SH-7 and Form MGT-14 (if applicable) to the registrar within 30 days of the resolution’s passage, together with the required costs.
Form SH – 7
Within 30 days of passing the relevant resolution, this form must be submitted to the RoC. This form’s purpose is to inform the registrar of the specifics of the increase in authorized capital. The following information is entered into the form on the MCA portal:
- Details of the company, including its CIN.
- Date of the meeting.
- Type of resolution.
- Form MGT-14 Service Request Number (SRN)
- Information on the total quantity of newly authorized shares as well as the initial authorized share capital.
- Information on how the new share capital was divided.
- Digital Signatures and DINs (If necessary)
Form MGT-14
This form must be submitted to the RoC within 30 days of passing the relevant resolution. The following information must be entered into the form on the MCA portal:
- Details of the company, including its CIN.
- Details regarding the resolution.
- Date of dispatch of the notice.
- Digital Signatures and DINs (If necessary)
The following attachments are to be provided:
- As per Section 102, a notice of the EGM along with the Explanatory Statement
- Updated MOA copy (change made in the Capital Clause).
- Updated AOA copy (in case of alteration to include provision for the increase in authorized share capital).
- Certified copy of the resolution passed in the EGM.
Suppose there is any further optional attachment. In order to prevent penalties or further punishment for which the firm and its officers may be held accountable, the forms must be delivered within the time frame specified.
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