Authorized Capital Increase - Legally Expand Your
Business Potential

Increasing a company’s authorized capital allows it to issue more shares and raise funds for growth, expansion, or restructuring. This legal process, governed by the Companies Act, 2013, requires board and shareholder approvals along with ROC filings. Whether you're onboarding new investors or planning strategic expansion, increasing your authorized capital ensures your company is prepared. Udyog Suvidha Kendra offers complete assistance for a hassle-free capital enhancement process.

Authorized Capital Increase

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Authorized Capital Increase

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Introduction to Authorized Capital

Understanding the structure of a company’s capital is essential for business growth and regulatory compliance. Authorized share capital plays a critical role in determining how much equity a company is legally allowed to issue. Before a company can issue shares to new or existing investors, it must ensure that its authorized capital permits such an issuance. Let’s break down the key concepts related to this.

What is Authorized Share Capital?

Authorized share capital is the maximum amount of capital a company is permitted to raise through the issuance of shares, as defined in its Memorandum of Association (MOA). It represents a ceiling beyond which the company cannot issue equity shares unless it formally increases the limit by passing resolutions and filing forms with the Registrar of Companies (ROC).

This capital limit does not reflect the actual money raised but the potential limit up to which the company can raise funds through equity. For instance, if a company’s authorized capital is ₹50 lakh, it can issue shares worth up to ₹50 lakh, even if only ₹25 lakh has been issued so far.

Authorized Capital

Why Companies Need to Increase Capital Limit

  • To Raise Funds: Before issuing additional shares to new or existing investors, the company must ensure its authorized capital permits the increase.
  • To Issue Bonus Shares: Bonus issues require sufficient headroom within the authorized capital limit.
  • For Business Expansion: Additional funds may be needed to support new projects, assets, or ventures.
  • Investor Entry or Rights Issues: Bringing in strategic investors or offering rights issues requires capacity for share allotment.
  • Merger or Restructuring Needs: During mergers, amalgamations, or acquisitions, increased capital may be required to realign shareholding.

Without increasing the authorized capital, a company may face legal restrictions in raising funds or altering its capital structure, potentially slowing growth or delaying key business decisions.

Increase Capital Limit

Paid-up Capital vs. Authorized Capital

Type Description
Authorized Capital Maximum capital a company can legally issue
Paid-up Capital Actual amount paid by shareholders for issued shares
Memorandum of Association (MOA) ROC records and financial statements
Approval Yes, requires shareholder and ROC approval
Function Acts as a ceiling for share issuance
Changes Changes as new shares are allotted
Representation Represents actual funding received from shareholders
Example If a company has ₹10 lakh authorized capital and has issued shares worth ₹5 lakh, the paid-up capital is ₹5 lakh, and it still has room to issue another ₹5 lakh worth of shares.

Legal Provisions & Governing Laws

The process of increasing authorized capital in India is governed by the Companies Act, 2013, along with rules prescribed by the Ministry of Corporate Affairs (MCA). Companies must comply with both internal governance (like board/shareholder approvals) and external regulatory filings with the Registrar of Companies (ROC). Here are the key legal aspects to understand:

Companies Act, 2013 – Key Sections

The primary legal framework for increasing authorized capital is laid out in the Companies Act, 2013, specifically under:

  • Section 61(1)(a): Allows a company, if authorized by its Articles of Association, to increase its share capital by issuing new shares.
  • Section 13 and 14: Required if any amendment to the Memorandum of Association (MOA) or Articles of Association (AOA) is involved.
  • Section 117: Mandates the filing of special resolutions with the ROC through Form MGT-14 within a specific time frame.

These sections provide the statutory basis for capital restructuring and guide companies in following due process before raising capital through equity.

Companies Act, 2013 Key Sections

Companies Act, 2013 – Key Sections

The primary legal framework for increasing authorized capital is laid out in the Companies Act, 2013, specifically under:

  • Section 61(1)(a): Allows a company, if authorized by its Articles of Association, to increase its share capital by issuing new shares.
  • Section 13 and 14: Required if any amendment to the Memorandum of Association (MOA) or Articles of Association (AOA) is involved.
  • Section 117: Mandates the filing of special resolutions with the ROC through Form MGT-14 within a specific time frame.

These sections provide the statutory basis for capital restructuring and guide companies in following due process before raising capital through equity.

ROC Compliance Rules and MCA Guidelines

Every company intending to increase its authorized capital must follow specific ROC compliance procedures laid down by MCA:

  • Form SH-7: Mandatory ROC form for increasing authorized share capital. It includes details of revised capital structure, board/shareholder resolutions, and fee payment.
  • Form MGT-14: Required when the increase involves alteration of the MOA through a special resolution.
  • Digital Signature Certificate (DSC): All forms must be digitally signed by authorized directors and certified by a practicing professional (CA/CS/CMA).
  • Fee Payment: Government fees are calculated based on the incremental authorized capital and must be paid online via the MCA portal.

Failure to comply with these ROC filings and timelines may result in penalties, late fees, or even rejection of the application.

ROC Compliance Rules

ROC Compliance Rules and MCA Guidelines

Every company intending to increase its authorized capital must follow specific ROC compliance procedures laid down by MCA:

  • Form SH-7: Mandatory ROC form for increasing authorized share capital. It includes details of revised capital structure, board/shareholder resolutions, and fee payment.
  • Form MGT-14: Required when the increase involves alteration of the MOA through a special resolution.
  • Digital Signature Certificate (DSC): All forms must be digitally signed by authorized directors and certified by a practicing professional (CA/CS/CMA).
  • Fee Payment: Government fees are calculated based on the incremental authorized capital and must be paid online via the MCA portal.

Failure to comply with these ROC filings and timelines may result in penalties, late fees, or even rejection of the application.

Role of MOA in Capital Amendment

The Memorandum of Association (MOA) is a key document that defines the constitution and scope of a company’s operations. The capital clause in the MOA must reflect the current authorized capital of the company.

When increasing authorized capital:

  • The Capital Clause (Clause V) of the MOA must be amended to reflect the revised limit.
  • This amendment requires approval through a special resolution passed in a general meeting.
  • A copy of the altered MOA must be filed with ROC along with supporting resolutions and forms.

Without updating the MOA, the increase in capital is not considered legally valid even if ROC forms are filed—making this step crucial for regulatory compliance.

Role of MOA in Capital Amendment

Role of MOA in Capital Amendment

The Memorandum of Association (MOA) is a key document that defines the constitution and scope of a company’s operations. The capital clause in the MOA must reflect the current authorized capital of the company.

When increasing authorized capital:

  • The Capital Clause (Clause V) of the MOA must be amended to reflect the revised limit.
  • This amendment requires approval through a special resolution passed in a general meeting.
  • A copy of the altered MOA must be filed with ROC along with supporting resolutions and forms.

Without updating the MOA, the increase in capital is not considered legally valid—even if ROC forms are filed—making this step crucial for regulatory compliance.

When Should a Company Increase Authorized Capital?

Companies must strategically evaluate when to raise their authorized capital to support business needs without legal delays. The following are the most common and critical situations where increasing the authorized capital becomes essential:

1

Before Issuing New Shares:

A company cannot issue shares beyond the limit of its authorized capital as defined in its Memorandum of Association (MOA). If it plans to allot new equity shares—whether to promoters, new investors, or employees (via ESOPs)—the capital limit must first be revised. This ensures the share allotment is legally valid and accepted by regulatory authorities.

2

During Fundraising or Investment

Fundraising activities often involve issuing fresh equity to venture capitalists, angel investors, or strategic partners. Without adequate authorized capital, companies may not be able to honor these investments. To prevent transaction delays or investor concerns, it is advisable to increase the capital in advance of any major funding round or issuance.

3

For Mergers, Acquisitions, or Restructuring

During a merger, acquisition, or internal restructuring, companies may be required to issue shares as part of the consideration. This could involve share swaps or equity realignments that necessitate higher capital limits. Failing to do so could lead to regulatory hurdles, delay in deal execution, or non-compliance with the Companies Act, 2013.

4

In Case of Expansion or Bonus Issue

Expanding into new business segments, entering international markets, or opening new locations may require additional capital, often funded by equity. Similarly, issuing bonus shares to existing shareholders is only possible if the authorized capital has enough room to accommodate the new shares. Planning for this increase ensures a smooth execution of such initiatives.

Step-by-Step Process to Increase Authorized Capital

Increasing authorized capital involves a structured legal procedure under the Companies Act, 2013. The process ensures that the proposed changes are approved by the company’s board, shareholders, and the Registrar of Companies (ROC). Below is a step-by-step breakdown of the process:

1

Hold Board Meeting and Pass Resolution

The process begins with a Board Meeting to propose the increase in authorized capital. Directors must:

  • Approve the draft notice of the Extraordinary General Meeting (EGM).
  • Propose amendments to the MOA’s capital clause.
  • Authorize a director or company secretary to handle ROC filings and compliance.

Board resolution must be recorded and signed as per company law guidelines.

2

Alter Capital Clause in MOA

The Memorandum of Association (MOA) must be amended to reflect the revised authorized share capital. This involves:

  • Updating Clause V (Capital Clause) of the MOA.
  • Including the proposed capital increase in the notice for the EGM.
  • Ensuring the Articles of Association (AOA) permit such amendments. If not, the AOA may also require alteration.
3

Call and Conduct Shareholders’ Meeting (EGM)

An Extraordinary General Meeting (EGM) of shareholders is convened with proper notice (minimum 21 days) to:

  • Pass a special resolution approving the increase in capital.
  • Approve the amendment of the MOA accordingly.

A certified copy of the special resolution is required for ROC filings.

4

File ROC Forms – SH-7 and MGT-14

After the EGM:

  • Form SH-7 must be filed within 30 days of passing the resolution. It details the revised capital structure.
  • Form MGT-14 is filed within 30 days (only if a special resolution was passed), attaching:
    • Certified true copy of the resolution
    • Updated MOA
    • EGM notice and explanatory statement
    • Board resolution

All forms must be signed digitally and certified by a practicing professional.

5

Receive ROC Approval and Updated Master Data

The ROC reviews the forms and supporting documents. Upon approval:

  • The MCA master data is updated to reflect the new authorized capital.
  • The company can now issue shares up to the revised limit legally.

A copy of the updated MCA records and approval acknowledgment should be maintained for statutory compliance.

ROC Forms and Government Fees

Increasing a company’s authorized capital involves mandatory filings with the Registrar of Companies (ROC) along with the payment of government fees and stamp duty. Understanding the correct forms, fee slabs, and state-wise requirements is crucial for smooth and compliant processing.

ROC Forms Required (SH-7, MGT-14)

Two primary ROC forms are used for increasing authorized capital:

  • Form SH-7 (Mandatory)
    Filed within 30 days of passing the resolution to increase authorized share capital. It must include details of existing and revised capital, the board resolution, and MOA changes.
  • Form MGT-14 (If Special Resolution Passed)
    Required when a special resolution is passed to alter the MOA. Must be filed within 30 days and include:
    • Certified copy of the special resolution
    • Altered MOA
    • Board and EGM resolutions

Both forms must be signed with a Digital Signature Certificate (DSC) and verified by a Chartered Accountant, Company Secretary, or Cost Accountant.

ROC Forms
Stamp Duty

Additional Stamp Duty (State-Wise)

In addition to ROC fees, companies are required to pay stamp duty on the increase of authorized capital. The amount varies state-wise, as stamp duty is governed by respective State Stamp Acts.

  • Maharashtra: ₹0.50 per ₹1,000 of increased capital
  • Delhi: ₹0.15 per ₹1,000
  • Karnataka: ₹1.00 per ₹1,000 (subject to maximum limits)

The stamp duty is auto-calculated by the MCA portal during the SH-7 filing, based on the registered office location of the company.

Government Filing Fees (Based on Capital Slabs)

ROC fees for filing Form SH-7 are calculated based on the difference between the existing and the proposed authorized capital. These fees are defined in the Companies (Registration Offices and Fees) Rules, 2014:

Authorized Capital (₹) Filing Fee (₹)
Up to ₹1,00,000 ₹5,000
₹1,00,001 to ₹5,00,000 ₹5,000 + ₹400 for every ₹10,000 increase
₹5,00,001 to ₹10,00,000 ₹20,000 + ₹300 for every ₹10,000 increase
₹10,00,001 to ₹50,00,000 ₹35,000 + ₹200 for every ₹10,000 increase
₹50,00,001 to ₹1,00,00,000 ₹1,55,000 + ₹100 for every ₹10,000 increase
Above ₹1,00,00,000 ₹2,05,000 + ₹75 for every ₹10,000 increase

Note: Fees may vary slightly based on company type (private/public/OPC).

Documents Required for Capital Increase

Below is the complete list of documents required to process an Authorized Capital Increase under the Companies Act, 2013:

1. Certified Copy of Board Resolution

Approves capital increase and EGM notice; includes date, venue, and MOA amendment proposal.

2. Notice of EGM

Sent to shareholders with meeting details, explanatory statement (Sec 102), and draft resolution.

3. Special Resolution Passed in EGM

Shareholders' approval for capital hike and MOA alteration.

4. Altered Memorandum of Association (MOA)

Updated Clause V reflecting revised authorized share capital.

5. Altered Articles of Association (AOA) (if required)

Amended if AOA restricts capital changes.

6. Digital Signature Certificates (DSCs)

Required for authorized directors and certifying professionals (CA/CS/CMA).

7. Professional Certification

Verification by practicing CA, CS, or CMA declaring form accuracy.

8. Stamp Duty Payment Receipt

Receipt of paid duty for increased capital, based on registered office state.

Timeline for Authorized Capital Amendment

Increasing a company’s authorized share capital is a time-bound legal process involving internal approvals and regulatory filings. Understanding the typical timeline helps in planning share issuances, funding activities, and compliance requirements more efficiently. Here’s a breakdown of the key stages and their respective durations:

Internal Preparation

Internal Preparation and Resolution Passing

The initial phase involves conducting a board meeting, drafting the EGM notice, and obtaining shareholder approval through a special resolution. This stage typically takes 2–3 working days, depending on internal readiness.

Key actions:

  • Schedule and conduct board meeting
  • Issue EGM notice (with 21 days’ notice or shorter if approved)
  • Hold the EGM and pass the special resolution

If the company chooses shorter notice, ensure shareholders give written consent as per the Companies Act.

MCA/ROC Processing Time

MCA/ROC Processing
Time

After passing the resolutions, the company must file Form SH-7 (and MGT-14, if applicable) with the ROC within the prescribed time limits. Once filed, the Registrar of Companies (ROC) usually processes and approves the filings within 2–5 working days, provided:

  • Forms are error-free
  • Fees and stamp duty are paid correctly
  • Supporting documents are complete and certified

Delays may occur if forms are defective, require resubmission, or if ROC is backlogged.

Expected Duration

Expected Completion Duration

On average, the entire process takes 5 to 10 working days, including preparation, approvals, filings, and ROC acknowledgment. Well-prepared companies with professional support can often complete the process faster.

Estimated Timeline:

  • Internal approvals: 2–3 days
  • ROC filings and processing: 2–5 days
  • Buffer for revisions/clarifications: 1–2 days

Proper planning and documentation can help ensure the capital amendment is completed without regulatory delays.

Penalties for Non-Compliance

Failure to follow the prescribed process for increasing authorized capital can lead to legal complications, financial penalties, and reputational damage. The Companies Act, 2013 imposes strict consequences for delays, misfilings, or unauthorized issuance of shares. Below are the major non-compliance areas and their consequences:

Late Filing of SH-7 or MGT-14

1. Late Filing of SH-7 or MGT-14

Both Form SH-7 and Form MGT-14 must be filed with the Registrar of Companies
(ROC) within the specified time limits (typically 30 days from the date of
resolution). Delayed filings attract additional fees and may render the resolution
ineffective. Consequences of Late Filing:
● Additional fees of ₹100 per day of delay (as per MCA rules)
● Delay in approval or update of authorized capital on MCA records
● Possible rejection of related forms like PAS-3 (for share allotment)
Timely filing ensures legal standing and avoids financial penalties.

2. Issuing Shares Without Increasing Capital

A company cannot issue shares beyond its authorized capital limit. Doing so without
first amending the capital clause in the MOA is a direct violation of the Companies
Act. Implications:
● The issuance is considered void and illegal
● ROC may invalidate the allotment and require refund to investors
● Directors may be held personally liable for damages and legal costs
● Investors may lose confidence due to non-compliance
Companies must ensure authorized capital is increased and approved before
allotting additional shares.

Issuing Shares Without Increasing Capital
Legal Consequences and ROC Actions

3. Legal Consequences and ROC Actions

If the ROC detects non-compliance during scrutiny or routine inspection, the
company and its officers can face legal action, including fines, notices, and further
regulatory hurdles. Possible ROC Actions:
● Show-cause notices under Section 450 of the Companies Act
● Monetary penalties on the company and responsible directors (up to ₹1 lakh
or more)
● Rejection of related filings like PAS-3 or DIR-12 until compliance is rectified
● Marking the company as non-compliant on MCA records
Maintaining procedural accuracy is critical to avoid regulatory risk and ensure
smooth business operations.

How Udyog Suvidha Kendra Helps You

1

End-to-End Filing Support

We handle the entire process—from board resolution drafting to ROC form filings—ensuring error-free compliance with MCA guidelines, accurate document preparation, and timely approvals for your authorized capital increase.

2

MOA & AOA Amendment Assistance

Our experts assist in reviewing and updating your MOA and AOA as per legal requirements, ensuring all capital clause modifications are properly aligned with the Companies Act and approved without delays.

3

Legal Advisory & Compliance Monitoring

We provide professional guidance on capital planning, stamp duty estimates, and compliance tracking. Our proactive alerts ensure timely filings, helping you avoid late fees, penalties, or ROC objections.

Authorized Capital Increase FAQs

What is authorized share capital?
Authorized share capital is the maximum capital a company is legally allowed to raise by issuing shares. It is defined in the company’s Memorandum of Association and must be increased before issuing additional equity to investors or promoters.
A company should increase its authorized capital to raise funds, issue new shares, expand operations, or comply with investor agreements. Without increasing the limit, it cannot issue equity beyond the existing capital defined in its MOA.
No. While board approval initiates the process, a special resolution from shareholders is also required. The company must then file forms like SH-7 and MGT-14 with the ROC to legally register the capital increase.
The two main ROC forms are Form SH-7, which is mandatory for all cases, and Form MGT-14, required if a special resolution is passed. Both must be filed with supporting documents and within 30 days of resolution.
The entire process usually takes 5 to 10 working days, including board and shareholder approvals, filing forms with ROC, and receiving confirmation. Timelines may vary depending on documentation readiness and ROC workload.
Government fees depend on the slab of increased capital. For example, increasing capital from ₹10 lakh to ₹25 lakh may incur a fee of ₹30,000–₹50,000, plus stamp duty as per the state where the registered office is located.
Yes, stamp duty is mandatory and varies state-wise. It is calculated based on the amount of increase and auto-collected by the MCA portal during SH-7 filing. Rates differ across states like Maharashtra, Delhi, and Karnataka.
No. Issuing shares beyond the authorized capital limit is illegal under the Companies Act, 2013. Such an act may lead to penalties, share invalidation, and legal action by the ROC against the company and its directors.
Yes. Clause V (Capital Clause) of the MOA must be amended to reflect the revised authorized share capital. The updated MOA must be submitted along with the ROC filings to complete the legal process.
Only authorized signatories such as directors, company secretaries, or ROC professionals with a valid Digital Signature Certificate (DSC) can file SH-7 and MGT-14. Certification by a CA, CS, or CMA is also required.
Late filing leads to additional fees of ₹100 per day and may delay approval. Persistent delays can result in the form being marked defective or rejected by the ROC, causing compliance and operational issues.
Yes. Authorized capital is often increased during mergers, acquisitions, or business restructuring to facilitate share reallocation, funding, or equity adjustments required for the transaction. It must follow the prescribed ROC procedure.
Yes. An Extraordinary General Meeting (EGM) must be held to pass a special resolution. This shareholder approval is essential and forms the legal basis for amending the MOA and increasing authorized capital.
There is no fixed upper limit under the Companies Act, but the proposed increase must be reasonable, justified, and supported by documentation. Approval depends on shareholder consent and ROC compliance with due process.
We provide end-to-end support including board resolutions, ROC filings, RD approvals, and address updates across all statutory platforms—ensuring timely, error-free compliance without disrupting your operations.