Increase in authorised share capital
Authorised share capital is the ceiling in the memorandum. Company Suggestion alters that clause by an ordinary resolution and files Form SH-7 within 30 days.
How is authorised capital increased?
Section 61 of the Companies Act, 2013 lets a limited company alter its share capital by an ordinary resolution, if the articles authorise it. Increasing the capital means rewriting the capital clause of the memorandum.
Section 64 requires notice of the alteration to the Registrar within 30 days. That notice is Form SH-7.
When is an increase needed?
Two situations need the ceiling raised first.
- A further issue of shares would take the issued capital above the present authorised capital.
- An investor’s subscription does not fit inside the present capital clause.
An LLP has contribution, not authorised share capital. This filing is for a company.
Which documents does SH-7 need?
SH-7 is filed with four attachments.
- The notice of the general meeting and the ordinary resolution
- The altered memorandum
- The minutes of the meeting
- Proof of stamp duty, where the state charges it on the increase
What are the steps?
Company Suggestion completes the increase in four steps.
- The articles are checked. The board calls a general meeting.
- The members pass an ordinary resolution and adopt the new capital clause.
- Stamp duty is paid where that state levies it.
- SH-7 is filed within 30 days.
Frequently asked questions
4 questions cover the rules that decide this registration.
Is the resolution ordinary or special?
Section 61 says an ordinary resolution, unless the articles require a special resolution.
Which form is filed?
Form SH-7, within 30 days of the alteration, under section 64.
Is stamp duty payable on the increase?
Several states charge stamp duty on an increase in authorised capital. The rate is the rate of that state. Company Suggestion calculates it before SH-7 is filed.
Does the increase allot new shares?
No. It only raises the ceiling in the memorandum. A later allotment issues the new shares to named persons.