The Companies Act 2013 defines that “Authorized capital” or “nominal capital” means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.
The Companies Act 2013 allows the companies to alter its authorized share capital with certain procedures which are governed by Section 61-64 of the Act along with Section 13 and 14 of the act which governs the alterations to the Chartered Documents being the Memorandum Of Association and Articles Of Association of the company.
PROCEDURE FOR INCREASING AUTHORIZED SHARE CAPITAL:
- Check whether the company prima-facie authorized by the Articles of association to increase the share capital. If it does not authorize, the proceedings are to be completed with the objective of altering them.
- To convene the board meeting for enabling the board to call for extraordinary general meeting (if not passed at Annual General Meeting) and to get approval from the shareholders for increasing the authorized share capital.
- Call for an extraordinary general meeting of the shareholders of the company by sending a notice with clear agenda, explanatory statements and the resolutions to be passed to alter the Memorandum of Association and Articles of Association, which are to be altered for the purpose of increasing the authorized share capital.
- Pass the resolutions for increasing the authorized share capital of the company and corresponding alterations in Memorandum of association and Articles of Association by special resolution.
- Authorize the board to file necessary forms and resolutions with ROC having jurisdiction.
- Filing the e- form SH7 with ROC by paying the requisite fee.
Altering the Memorandum of association and Articles of Association.
- Section 61 of the Companies Act, 2013 states about Power of limited company to alter its share capital, sub-clause further states that a limited company having a share capital may, if so authorized by its articles, alter its memorandum in its general meeting to increase its authorized share capital by such amount as it thinks expedient.
- A company can increase its authorized share capital by altering the Memorandum of association. Section 13 of the Companies Act deals with altering the memorandum of association and section 14 of the above-said act deals with altering the Articles of association.
- Section 13 of the Act states that as provided in Section 61, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.
- A company can alter its articles by passing a special resolution and every alteration of the articles under Section 14 and a copy of the order approving such alteration has to be filed with the registrar with a printed copy of altered articles within a period of fifteen days in a manner prescribed. Alteration of articles will be valid only if it’s originally in the articles.
List Of Documents Required As Attachments For Filing SH-7
- Certified true copy of the resolution for alteration of capital is mandatory in case of increase in share capital independently by company.
- Copy of order of central government is mandatory in case of increase in share capital with central Government order.
- Copy of the order of the tribunal is mandatory in case of increase in share capital with Central Government.
- Certified true copy of board resolution authorizing redemption of redeemable preference shares is displayed and mandatory in case of redemption of redeemable preference shares.
- Altered Memorandum of association is mandatory in case of increase in share capital independently or by order of Central Government or increase in number of members.
- Altered Articles of association are mandatory in case the same are altered.
- Working for calculations of ratios (in case of conversions) is mandatory in case of increase in share capital with central government order.
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