Increase Authorized Capital

As per Sec 2(8) of the Companies Act 2013, an “Authorized Capital” is the capital authorized by the memorandum of a company as the maximum amount of share capital of the company. The authorized share capital is the highest amount of share capital a company can provide its shareholders/members. Once a private limited company or a public limited company gets registered, the company has to comply with several compliances regularly. But with business expansion, companies face fund requirement for its expansion. One way to raise funds is by issuing shares. However, in case the company wants to issue more shares than its authorized share capital, it has to make provisions fortheincrease in authorized share capital of the company.

Companies can alter their authorized share capital as per the Companies Act 2013. It involves certain procedure governed by different sections. The act also governs the changes introduced in the chartered documents being the Memorandum of Association and Articles of Association of the company. Before providing new equity shares or before increasing the paid-up capital, a company may have to make an increase in authorized share capital. Based on the authorized capital, a company has to pay a fee to the government.

To introduce more capital, a company may need to increase its authorized capital.

For an increase in authorized capital, a company must pay stamp duty to the state government along with the ROC fees that have to be electronically paid through the MCA portal. The amount of stamp duty may vary from state to state.

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