💰 Authorised Capital change of a company

Enhance Capital Base | Enable Growth | Legal Compliance Authorised Share Capital is the maximum amount of share capital that a company is legally allowed to issue to its shareholders, as stated in its Memorandum of Association (MOA). If a company wants to issue more shares or raise funds through equity, it must first ensure that its authorised capital is sufficient — and if not, it must increase it through a legal process with ROC approval.

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⚖️ Legal Framework

Change in Authorised Capital is governed under:

• Section 61 of the Companies Act, 2013
• Companies (Share Capital and Debentures) Rules, 2014
• The company’s MOA and Articles of Association (AOA)

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📌 Why Increase Authorised Capital?

Reason	Explanation
New equity investment	Raising funds from new investors or shareholders
Bonus share issuance	Issuing bonus shares from reserves
Employee stock option plans (ESOPs)	Allocating shares under ESOPs or sweat equity schemes
Business expansion	Planning for long-term capital infusion
Pre-requisite for IPO or fundraising	Aligning capital structure with future growth or compliance

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🧭 Step-by-Step Process to Increase Authorised Capital

🔹 1. Check Articles of Association (AOA)

• Ensure AOA permits increase of authorised capital
• If not permitted, AOA must first be altered via Special Resolution

🔹 2. Board Meeting

• Pass a Board Resolution to propose increase in capital
• Fix date for Extraordinary General Meeting (EGM) to seek shareholder approval

🔹 3. Hold EGM

• Pass a Special Resolution for increasing authorised capital
• Approve amendment to Clause V of the Memorandum of Association

🔹 4. ROC Filing

Form	Purpose	Due Date
SH-7	Intimation of change in authorised capital	Within 30 days of resolution
MGT-14	Filing of special resolution (if required)	Within 30 days of EGM

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📋 Documents Required

• Board Resolution
• Notice of EGM with explanatory statement (Section 102)
• Shareholders’ Special Resolution
• Altered MOA (Clause V)
• Altered AOA (if applicable)
• Digital Signature Certificate (DSC) of Director
• Updated Capital Structure Table

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💡 Important Notes

✅ Must Do	❌ Avoid
Check ROC master data before and after filing	Filing SH-7 without proper shareholder approval
Align AOA with MOA if it restricts capital increase	Issuing shares beyond existing authorised capital
Use proper legal drafting for resolutions	Delay in SH-7 or MGT-14 may attract late filing fees
Update PAN, GST, and bank if needed	Using altered capital in legal docs before approval

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📈 Impact of Capital Change

Area	Effect
ROC Master Data	Updated capital details on MCA portal
Equity Allotment	Enables further issue of shares (via PAS-3, etc.)
Statutory Filings	Must be consistent across ITR, GST, PF, ESIC, etc.
Fundraising Readiness	Signals financial preparedness to investors and lenders

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⚠️ Penalties for Non-Compliance

• Late filing fee: ₹100 per day (no maximum cap) for SH-7 or MGT-14
• Issuing shares beyond authorised capital is void and illegal
• May result in rejection of future filings and audit qualifications

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🛠️ How KLS Advisors Can Help

At KLS Advisors, we manage the end-to-end legal and procedural requirements for authorised capital changes: ✅ Review of MOA, AOA & capital structure ✅ Drafting of resolutions and notices ✅ Filing of SH-7 and MGT-14 with ROC ✅ MOA/AOA alteration and document certification ✅ Compliance with SEBI/Startup India (if applicable) ✅ Assistance with share issuance (via PAS-3) 📧 Email: info@klsadvisors.in 🌐 Website: www.klsadvisors.in

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✅ Conclusion

An increase in Authorised Share Capital is a critical step for business growth and fundraising. However, it requires careful planning, proper documentation, and ROC approval. Let KLS Advisors ensure your capital enhancement is compliant, timely, and aligned with your financial strategy.