The authorized capital of a company means the number of shares of a Company can issue to its shareholders. It is a maximum value of securities that a company can legally issue. The number is specified in the Memorandum of Association. When any company is Incorporated but can be changed or increased later with shareholder’s approval. For I Share Capital, the company has to make sure that its Articles of Association contain a provision authorizing it to increase its Authorized Share Capital. Most of the companies start their business with the minimum capital of Rs. 1 lakh. But, to start any kind of business at the best level the capital requirement is more than 1 lakh. However, for this, you have to raise or share your company’s capital. In order to maintain financial decorum, The Government lay down that no one can increase their capital by using their shares without any reason.
Benefits of Increase the Authorized Capital
There are many advantages behind this:
- Money to grow the business: Company may grow their business with an infusion of cash derived from the sale of stock without any borrow from traditional sources.
- Money for Shareholders and Others: When the company has more cash then they offer additional compensation may be offered to Investors, Stakeholders, Founders, Senior Management and many more.
- Other Benefits of Going Public: Once the company has gone public then extra equities may be easily sold to raise capital.
Process to Increase Authorized Capital
The authorized capital of the company can be increased at any time. However, the procedure to Increase Authorized Capital are;
- Verifying Approval within the Articles of Association.
- Held a board of meeting to notify about the incidence of EGM.
- Extraordinary General Meeting.
- ROC Form Documenting
These are the mandatory documents which are required to be filed by the company:
- Filing of Form SH-7.
- Altered Copy of MOA and AOA.
- Board Resolution Passed by the Company
- Resolution passed in extra ordinary general meeting (EGM)
- Notice of EGM explanatory Statement.
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