What is the Authorised Capital?
‘Authorised capital’ is that capital which is authorised by the memorandum of a Company for being the maximum amount of share capital of the Company, according to Section 2(8) of the ComPANies Act, 2013. It is also called the ‘nominal capital’. Thus with this, it is very much clear that a Company can exPANd and extend its business up to the level of the Authorised Capital.
According to the ComPANies Act 2013, the comPANies can change their share capital by following certain measures and pROCedures which are governed by Section 61-64 of the Act. This is also governed by Section 13 and 14 of the act which governs and allows the alterations to the Memorandum of Association and Articles of Association of the Company.
There can be an addition of new shares into existing or new stakeholders. Moreover, the funds and money which would be raised shall be deposited into the bank account of the Company. But before you can actually practise this, you have to go through a pROCess of increasing your authorised capital by following the few steps which are mentioned below.
The following pROCedure has to be followed for the increasing of the Authorised Share Capital.
1.The Authorisation must in the Article of Association(AOA)
Firstly, we have to check whether the Company Article of Association has the provision for an increase in authorised capital. This is the main condition as per Section 61 of the Act. Only if the Company AOA allows the exPANsion of the share, then only we can pROCeed, else the articles have to be amended according to the provision of Section 14 of the ComPANies Act, 2013. After this is done, we are good to go to the next step.
2.Calling of the Board Meeting of Board of Directors (BOD)
In the Board Meeting, the Board of Directors or the BOD decide upon and approve of the following-
Increase of the authorised capital of the Company subject for the approval of the shareholders
Fixation of the date, day, time and venue of the Extraordinary General Meeting or the EGM of the shareholders.
Approve and issue the notice of the EGM which has the agenda and the explanatory statement to all members, directors & auditor of the Company.
Authorising the Company director or secretary for the issue notice of the EGM
3.The holdings of Extraordinary General Meeting (EGM)
The meeting of the EGM has to be held on the date, day, time and venue as it was decided by the Board of Directors. In this EGM, the resolution for the increase in the authorised capital is passed by passing an ordinary resolution.
4.Alteration in the Memorandum of Association(MOA)
Under this, the clause of authorised capital in MOA is altered. A limited Company has to file FORM SH-7 within the timesPAN of 30 days of such an alteration. It also has to be done along with the following documents:
- A copy of the Board Resolution
- A copy of the EGM ordinary resolution
- A copy of the notice of EGM with the Explanatory statement
- A copy of the Altered MOA