Alteration of Authorised Share Capital Process
Authorised Capital – Concept and meaning
Companies Act 2013, by Section 2(8) says, authorised or nominal capital means that capital which is authorised by the Memorandum of Association of the company to be the maximum amount of share capital of the company.
This is amount for which the company can issue shares. Issued capital can only be maximum to this amount and issuing capital up to authorised capital is not that tough as in the case of amending authorised capital. Every Memorandum of Association of a company will have the Vth clause as capital clause, if that is a company with share capital.
Alteration of Authorised capital:
When a company want to diversify or increase the volume of the business with more capacity, they may need more capital. In such situations the company may have to increase its authorised capital, so that they can go to investors or market and get more funds.
If a company want to increase or decrease its authorised capital, first and foremost requirement is the provision in Articles of Association of the company. Section 61 says that if there is provision in the Articles of the company empowering the company to alter its authorised capital, the company can do so by a proper resolution passed in the general meeting.
The procedure for increasing the authorised capital is given below. It is very important to note here that, if the company have a full time company secretary, the entire work of alteration will be taken care by the company secretary.
For increasing authorized share capital, the following procedure has to be followed by a company having a share capital:
1. There should be a provision in the articles of association of the company empowering the company to alter its authorised capital. If any case the articles have no provision, then the company have to alter its articles of association. The entire process of altering the articles and filing with Registrar need to be completed first.
2. If the articles provides for it, then a board meeting should be conducted.
3. Issue notice for convening a Board meeting to all directors as per the provisions of the Act.
4. Hold the Board Meeting-
to decide about the increase in the authorised share capital of the company;
to fix time, date and venue for holding general meeting for increasing the authorised share capital of the company;
to approve notice, agenda and explanatory statement to be annexed to the notice of the general meeting;
to authorise the company secretary, if any or a Director to issue notice of the general meeting.
5. In the case of a listed company, within prescribed time ie. 24 hours, after the conclusion of the Board meeting, send to the stock exchanges, where the securities of the company are listed, particulars of the proposed increase in the authorised share capital of the company.
6. Issue notice of the general meeting to all members, directors and the auditors of the company.
7. In case of a listed company, send copies of the notice of the general meeting to the concerned stock exchanges.
8. Hold the general meeting and pass special resolution for increasing the authorised share capital of the company.
9. In case of a listed company, forward a copy of the proceedings of the general meeting to the concerned stock exchange within the prescribed time, ie. 24 hours.
10. File with the ROC within 30 days of passing of the resolution, Form MGT-14 along with prescribed fees and following attachments:
Certified true copy of the special resolution;
Copy of the notice of general meeting and explanatory statement annexed to the notice;
Copy of altered Memorandum of Association and Articles of Association.
10. File with ROC, Form SH -7, Notice to Registrar of any alteration of share capital,
within 30 days of the passing of the resolution with prescribed fees.
Attachments to Form SH 7 are
Certified true copy of the special resolution;
Copy of the notice of general meeting and explanatory statement annexed to the notice;
Copy of altered Memorandum of Association.
11. Alter the capital clause in all the copies of the memorandum and articles of association of the company.
