A company may need to increase its authorised share capital before issuing new equity shares and increasing paid-up capital. Authorised share capital is the total value of shares a company can issue, while paid-up capital is the total value of shares the company has issued. Paid-up capital can never exceed authorised capital. Hence, if a company having an authorised capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs would like to induct new shareholders, it can do so either by:
In most cases, new shares are issued and authorised capital is increased. Get in touch with an IndiaFilings Advisor at sales@indiafiilngs.com for assistance with increasing authorised share capital.
VERIFY AOA OF THE COMPANY
Before commencing the procedures for increasing authorised share capital, verify the AOA to ensure there is enabling provision in the Articles of Association (AOA) particularly with reference to increase authorized share capital. If there are no provisions for increasing authorised share capital, the company must first make changes to the AOA of the company.
Note: Most of the AOA’s will have enabling provisions for increasing authorised share capital.
CONVENE BOARD MEETING
To increase the authorised share capital, first, convene a Board Meeting by providing notice to the Director. At the Board Meeting, obtain approval from the Board of Directors for increasing authorised share capital. Then fix a date, time and place for conducting an Extra-Ordinary General meeting to obtain approval of shareholders for the increase of authorised share capital and making changes to the MOA of the company.
Finally, obtain approval of the Board of Directors of Company Secretary present at the meeting to present notice of Extra-Ordinary General Meeting to the shareholders. Based on the approval, present the Notice of Extra-Ordinary General Meeting to all shareholders, Directors and Auditor of the Company.