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Increase In Authorised Share Capital
Hence, if a company having an authorised capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs would like to induct new shareholders, it can do so either by:Increasing authorised share capital and issuing new shares. (or) Transferring shares from existing shareholders to the new shareholders
As per my understanding procedure for Increase in Authorize share Capital is one of the most frequently searched topics by professionals. An attempt has been made from my side to unlock the provisions of Companies Act, 2013 related to Increase in Authorize share Capital along with requisite secretarial practice w.r.t. to sample Board and Shareholders’ resolutions.
Under Companies Act, 2013, the process of Increase in Authorise Capital is governed by Section 61 read with section 13 and 64 of Companies Act, 2013. Procedure in this regard is given below:
Procedure for Increase in Authorize share Capital
1. Authorisation in Article is must for Increase: For Increase in Authorise Share Capital, the company has to make sure that its Articles of Association contain a provision authorising it to increase its authorized share capital. Reason being Section 61 of the Companies Act, 2013, mandates that for increasing the Authorised share capital, authorization in Articles of Association is a pre-condition.
In other words Company has to make sure that its Articles of Association contain a provision authorising it to increase its authorised share capital.
So first check whether there is enabling provision in the Articles of Association regarding increase in authorised share capital.
If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the Authorised share capital of the Company.
2. Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. Main agenda for this Board meeting would be:
a. To Get in-principal approval of Directors for Increase in authorised share Capital;
Notice to be given to Registrar for alteration of share capital.
As per section 64 of the Companies Act, 2013, where a company alters its share capital for increase in authorised share capital in accordance with sub-section (1) of section 61, the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of such increase along with a copy of altered Memorandum.
Alteration in the Capital Clause of Memorandum of Association
pursuant to the provisions of Section 13, 61 and 64 and other applicable provisions of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed thereunder, the consent of the Board of Directors of the Company be and is hereby accorded, subject to the approvals of shareholders in the General meeting, for substituting Clause V of the Memorandum of Association of the Company with the following clause.
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