INCREASE CAPITAL OF COMPANY
@ Rs 4999 Only + Govt Fees On Actuals
You Can Increase The Capital Of Your Company Anytime. Two Types Of Capital That You Can Increase Paid-Up Capital Or Authorized Capital. Call For Expert Consultation
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What Is Capital In Company?
Capital is the amount that is invested in the company to start and run the business. Every business needs capital without it, no business can start or grow whether it is a sole proprietor, private limited company or any public company even in LLP the partners contribute capital to start the business. At the time of registration of the company, the shareholders have to subscribe to some shares in respect of which they will invest the amount in the company and this capital amount is called paid-up capital. All the companies have to fix the amount of capital at the time of company registration and that amount has to be deposited in the bank account of the company after registration. But this amount can be increased or decreased after registration whenever it is required.
Types Of Capital In Company
- AUTHORISED CAPITAL: According to section 2(8) the authorized capital or nominal capital means such amount of capital which is authorized by the memorandum of association of the company to be the maximum amount of share capital of the company. Although it can be increased anytime during the life of the company whenever it is required. The procedure to increase the authorized capital is mentioned in section 61, 64 and rules made thereunder.
- ISSUED CAPITAL: The issued capital is the amount that is issued by the company under the authorized capital, the company may issue the complete authorized capital or may issue a portion of authorized capital to raise the fund. Issued capital always equals to or less than authorized capital.
- UNISSUED CAPITAL: It is the balance amount of the authorized capital which is not issued by the company
- SUBSCRIBED CAPITAL: It is the part of issued capital that is subscribed (agree to take) by the shareholders
- CALLED UP CAPITAL: It is the part of subscribed capital; it is the amount that is called up for payment by the company.
- PAID-UP CAPITAL: It is the part of called up capital, the amount which is paid to the company by the shareholders in respect of shares taken by them.
Process To Increase Authorized Capital In Company
STEP 1 - Make Provision In Article Of Association
The provision for increasing authorized capital must be mentioned in the article of the company. If any provision for increasing authorized capital is not mentioned in the AOA, then the AOA has to be amended under section 14 of the companies act, 2013 with the approval of shareholders.
STEP 2 - Prepare Board Resolution
Convene board meeting and pass the resolution for increasing authorized capital and for calling a general meeting for taking approval of the shareholders for increasing authorized capital
STEP 3 - Appoint Authorizing Director
In the board meeting any one director will be authorized to complete the procedure for increasing authorized capital by taking all the required steps, by way of filing documents to the registrar, or signing the documents etc.
STEP 4 - Pass Ordinary Resolution
Call general meeting (Extra-ordinary general meeting) for taking approval of shareholders by passing the ordinary resolution for increasing authorized capital.
STEP 5 - Amendment in Memorandum Of Association
After passing the resolution for increasing authorized capital the company has to alter the MOA of the company by way of increasing authorized capital in the capital clause.
STEP 6 - Filing of Forms
After completion of the above steps the final steps is to file form SH-7 to the registrar for their approval. This form shall be filed within 30 days from the date of passing ordinary resolution along with:
- Copy of board resolution
- Copy of ordinary resolution
- Copy of explanatory statement
- Copy of altered MOA
- The amount of stamp duty shall be payable according to the amount of capital increase and the state where the registered office of the company is situated.
- If the registrar is satisfied with the application of the company, then he will approve the form and the same will be updated on the MCA database.
Process To Increase Paid-Up Capital In Company
STEP 1 - Prepare Board Resolution
Hold board meeting and pass the board resolution for increasing the paid-up capital. And passing the resolution for calling the general meeting.
STEP 2 - Appoint Authorizing Director
The board will authorize a director to file all the relevant forms to the registrar for completion of this resolution
STEP 3 - Pass Special Resolution
Conduct a general meeting and pass the special resolution for increasing paid-up capital by way of allotment of new shares.
STEP 4 - Filing Of Forms
File all the relevant forms to the registrar for their approval within the specified time limit
STEP 5 - Allotment Of Shares
Allot shares to the shareholder within 60 days of depositing the capital amount in the company’s account.
STEP 6 - Issue Share Certificate
Issue share certificate within 2 months from the date of allotment to the shareholders in respect of shares held by them.
Ways To Increase Paid-Up Capital In Company
- Private placement
- Preferential Allotment
- Right issue
- Bonus issue
- Sweat equity shares
- Converting debt or debenture into equity, etc.
Documents Required To Increase Capital In Company
- Copy of board resolution
- Copy of ordinary resolution
- Copy of explanatory statement along with notice
- Memorandum of association
- Article of association
- Digital signature of the authorized director
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Frequently Asked Questions
Authorized capital is the capital that is mentioned in the memorandum of the company as a maximum amount of capital of the company. The company cannot invest more than authorized capital in the company in the form of share capital.
Form-SH-7 shall be filed to the registrar for increasing authorized capital along with all the required documents and fees. The list of the documents is:
- Board resolution
- Ordinary resolution
- An explanatory statement along with notice
- Altered MOA
No, the forms for increasing authorized capital and paid-up capital are different. The provisions framed for increasing capital authorized as well as paid-up is different from each other, there are specific sections given under the company act, 2013 for increasing paid-up capital and authorized capital.
The government fees depend upon the paid-up capital of the company and the stamp duty depends upon the increasing amount of the authorized capital and the state where the registered office of the company is situated.
The authorized capital is the maximum amount of capital that will be invested in the company and paid-up capital is the amount of capital that is currently invested in the company.
Authorized capital is always equals to or more than paid-up capital, paid-up capital cannot be more than authorized capital.
Yes, before increasing capital whether authorized capital or paid-up capital approval of shareholder is very important to take because the approval letter in the form of the resolution shall be filed to the registrar in forms.
The form SH-7 shall be filed to the registrar within 30 days from the date of passing an ordinary resolution.
What are the consequences of the company makes any default in the provision for increasing authorized capital?
If any company fails to comply with the provision of increasing authorized capital under section 64(1) of companies act, 2013 then:
- The company has to pay the penalty of Rs. 500/- per day till the default continuous and maximum of Rs. 500000/-
- Every office in default shall liable to pay the penalty of Rs. 500/- per day till the default continuous subject to the maximum amount of Rs. 100000/-
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