Procedure for Increasing Authorized Share Capital under the Companies Act, 2013:
Compliance with Sections 61, 13, and 64: The process of increasing authorized share capital is governed by Sections 61, 13, and 64 of the Companies Act, 2013. The detailed procedure is provided below.
Authorization in Articles of Association:
Ensuring that the Articles of Association contain a provision authorizing an increase in authorized share capital is crucial. Section 61 of the Companies Act, 2013, mandates this authorization in the Articles as a prerequisite for increasing authorized share capital.
Verification of Articles of Association:
Before proceeding, confirm the presence of an enabling provision in the Articles of Association regarding an increase in authorized share capital. If such a provision is absent, the company must initiate the process of altering its Articles of Association in accordance with Section 14 of the Companies Act, 2013, to insert the necessary clause enabling the increase.
Board Meeting:
Issue notices for a board meeting in compliance with Section 173(3) of the Companies Act, 2013. The main agenda for this meeting includes obtaining in-principal approval of directors for the increase in authorized share capital, fixing the date for an Extraordinary General Meeting (EGM), and approving the notice of the EGM.
Notice of EGM: Issue a notice for the Extraordinary General Meeting (EGM) to all members, directors, and auditors of the company as per Section 101 of the Companies Act, 2013.
Holding of EGM:
Conduct the EGM on the scheduled date and pass the necessary Ordinary Resolution under Section 61(1)(a) of the Companies Act, 2013, for the increase in authorized share capital.
ROC Form Filing:
File Form SH-7 within 30 days of passing the Ordinary Resolution with the Registrar of Companies, along with the prescribed fees and required attachments, including the notice of EGM, certified true copy of the Ordinary Resolution, and the altered Memorandum of Association.
Notice to Registrar for Alteration of Share Capital:
In accordance with Section 64 of the Companies Act, 2013, notify the Registrar within 30 days of the increase in authorized share capital by filing a prescribed notice along with a copy of the altered Memorandum.
Special Resolution Not Required:
Contrary to some professional views, a Special Resolution is not necessary for increasing authorized share capital. Section 61 of the Companies Act, 2013, which governs alterations in the capital clause, does not specify the nature of the shareholders' resolution. Therefore, an Ordinary Resolution suffices for increasing authorized share capital.
Sample Board Resolution for:
Increase in Authorised Share Capital
“RESOLVED THAT pursuant to the provisions of Section 61 and 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, 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, to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
Alteration in the Capital Clause of Memorandum of Association
“RESOLVED THAT 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.
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”
Sample Shareholders’ Resolution to be passed in the General Meeting:
Increase in Authorised Share Capital
SPECIAL BUSINESS
To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 61 read with Section 64 and other applicable provisions, if any, of the Companies Act, 2013 (including any amendment thereto or re-enactment thereof) and the rules framed there under, the consent of the members of the Company be and is hereby accorded to increase the Authorized Share Capital of the Company from existing Rs. 50,00,000 (Rupees Fifty Lacs) divided into 5,00,000 (Five Lacs) Equity Shares of Rs. 10/- each to Rs. 75,00,000 (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of Rs. 10/- each by creation of additional 2,50,000 (Two Lacs Fifty Thousand) Equity Shares of Rs. 10/- each ranking pari passu in all respect with the existing Equity Shares of the Company.
Alteration in the Capital Clause of Memorandum of Association
To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:
“RESOLVED THAT 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 members of the Company be and is hereby accorded for substituting Clause V of the Memorandum of Association of the Company with the following clause.
V. The Authorised Share Capital of the Company is Rs. 75,00,000/- (Rupees Seventy Five Lacs) divided into 7,50,000 (Seven Lacs Fifty Thousand) Equity Shares of face value of Rs. 10/- (Rupees Ten) each.”