Authorized share capital also called authorized stock, authorized shares, or authorized capital stock. It refers to the maximum number of shares a company is legally allowed to issue or offer based on its AOA.
Normally companies registered with lower authorized capital and increase it usually as per need.
Authorized share capital can be change only if it is authorized by Article of Association by respective company. For this change company must pass an ordinary resolution in members meeting.
A company can achieve any amount of authorised capital it wants, and the MOA will reflect this with changes. As a result, raising official capital has a cumulative effect on the overall share capital of the company.
The company's overall net worth grows in parallel with the increase in share capital. This increases the company's borrowing capability even more.
It may encourage investment because it can be easily accommodated if sufficient permitted capital is available.
The documentation must be filed with the MCA within 30 days of receiving shareholder approval for the increase in share capital.
As a result, the company's authorised share capital can be increased at any time, subject to the limitations and restrictions imposed by Section 61 (read in conjunction with Sections 13 and 14) of the Companies Act, 2013.
Checking the Articles of Association for approval. According to Section 61 of the Companies Act of 2013, consent in the Articles of Association is required before expanding the Authorised offer capital. As a result, checking that the relevant provisions are laid out in the Articles is necessary before increasing authorised share capital.
According to Section 14 of the Companies Act, 2013, if the Articles do not approve an increase, they must be altered to enable the rise before proceeding. A special resolution needs to be passed to modify the AOA.
Call a board meeting to inform them of the EGM. A board meeting is called, and it is resolved to have an EGM to consider and vote on the issue of increasing authorised share capital. After the board has agreed on the date, location, and duration of the EGM, a notice is sent to every member/shareholder, director, and auditor of the company, who will vote on the subject of raising authorised share capital, as per Section 101 of the Companies Act 2013.
Furthermore, the notification must include the voting mechanism for adopting the special resolution to enhance the company's authorised share capital and the explanatory statement required by Section 102 of the Companies Act.
Call an Extraordinary General Meeting (EGM). After notice of the imminent EGM has been sent out and the meeting has begun, the issue of increasing authorised share capital is discussed and then voted on according to the procedures outlined in the notice of the EGM's occurrence. The company's permitted share capital is increased through an Ordinary Resolution issued under section 61(1)(a) of the Companies Act, 2013.
Fill out the ROC Form to document your findings. Form SH-7 must be submitted with the relevant Registrar of Companies (ROC) within 30 days of the passing of the Ordinary Resolution, along with the necessary fees and attachments, as required by Section 64. Along with e-form SH-7, the following documents must be provided in addition to the modified MOA and AOA.
The maximum limit of a company's share that can be issue to shareholders is authorised capital.
The limit on how much money a company can start raising from the public is known as authorised capital. As a result, to boost funds from the general public, you must increase your company's authorised share capital.
Within 30 days following the resolution, the corporation must file Form SH-7.
To raise a company's approved capital, the articles of association must include a clause view of the increase in authorised capital and prior consent from the company's shareholders.