Each business needs more money over time to run the business. These funds may be needed in the long run and in the short term. The short-term need can be met by borrowing and development. But to continue, the company will need extra money. In a limited company, this can be done by raising the principal authorized capital of the company. As a limited private company is governed and regulated under the Company Act to make changes to the structure it is necessary to comply with the Act and the prescribed rules.
Upon registration of a Private Limited Company, the authorized and paid amount is specified in the company’s MOA. The company may therefore issue new shares within the mandated limit stated in the MOA. If a company wishes to withdraw more shares than the specified limit then amendments must be made to the MOA.
What is the main approved fee?
In terms of Section 2 (8) of the Companies Act, 2013 “Authorized Capital” is the capital approved by a company memorandum to be the maximum amount of a company’s share capital.
A company may expand its business to an authorized level. In the event that a company has to expand its business by investing more than before, the company should increase its authorized revenue by following the steps outlined in this article.
Increase in Authorized Share Fees
The Company may need to increase the approved budget before issuing new shares and increasing the amount paid. As a fixed share is the total number of shares a company can issue. The amount paid is the total number of company shares issued.
The amount paid does not exceed the authorized fee. Therefore, if the company approves Rs.10 lakhs and the Rs.10 lakhs payment would like to include new shareholders then it can be done:
- Increasing the maximum amount of authorized shares and issuing new shares (or)
- Transferring shares from existing shareholders to new shareholders.
In many cases after the news of new shares the authorized fee goes up. Contact our advisors for assistance in growing an approved budget.
How can you increase the company's authorized share price?
Confirm AOA Company
Before proceeding with the procedures for increasing the approved budget you need to certify the AOA to ensure that there is a provision in the Articles of Association that deals with the increase of the approved budget. In the absence of such a provision, the company must first make changes to the company’s AOA.
Note: Most AOAs have a proven track record for maximizing profits.
Call a Board Meeting
It is necessary to convene a meeting of the Board by giving notice to the Director in order to increase the authorized shares of the company. At a Board meeting, it is necessary to obtain approval from the Board of Directors in order to maximize the stated mandate.
After all this process, a date must be set for holding an Extraordinary General Meeting to obtain the shareholders’ approval to increase the prescribed amount and make changes to the Company’s MOA.
Finally, get the approval of the Board of Directors, the company secretary present at the meeting to submit a notice of the General Meeting to the shareholders. Based on the approval, notice of an extraordinary general meeting should be submitted to all shareholders, directors, and auditors of the company.
Extra-Ordinary General Meeting
Conduct an unusual general meeting and obtain the consent of the shareholders to increase the authorized share price at the time, date, and location specified in the notice.
Authorization of shareholders to increase expenditure must be in the form of a general decision.
Submit ROC forms
After the general decision has been passed at the General Meeting, Form SH7 must be submitted by the company within 30 days of the general decision being passed. The government’s prescribed fee must be paid and the documents listed below must be attached.
- Notification relating to Unusual General Meeting
- A certified copy of the true copy of the general amendment
- Amended Memorandum of Association (indicating large amount approved)
If the procedure stipulated in the Companies Act and the Companies Act is followed in order to increase the principal authorized capital of the company then the registrar may authorize the deposit and increase the maximum authorized share of the company. The newly approved budget will be reflected in the MCA portfolio.
If the approved budget is increased the company’s share capital can be increased by issuing new shares.
Frequently Asked Questions
The Company’s authorized amount is specified in clause V of the MOA.
Form MGT 14 and SH 7 are required to be submitted to the Registrar within 30 days from the date of approval of the approved budget increase.
The company is required to increase the maximum approved budget before issuing new shares and increasing the amount paid. Authorized shares are the total number of shares a company can issue.
Restricted Private Companies are required to have a minimum budget of Rs.1 lakh and Rs.5 lakh for limited public companies
Yes, it is necessary to increase the company’s approved budget.