“Authorized Capital”, is the maximum amount of share capital that a company can issue to its members/ shareholders. Generally, companies register with a small authorized capital and increase as per the requirements or conditions imposed by the lender/investors, customers. Company has to convene a Board Meeting and pass the resolution for change in share capital and also make necessary changes in MOA/AOA.
Here are the 2 most common reasons for change in Authorised Share Capital
- To raise the funds to expand the Business.
- To repay the Debts of the Company.
A company has to convene the board meeting for enabling the board to call for an extraordinary general meeting (if not passed at the Annual General Meeting) to get approval from the shareholders for increasing the authorized share capital.
Pass the resolutions for increasing the authorised share capital of the company.
Once the Board Resolution for an Increase in authorised share capital is passed, necessary alterations are also to be made in MOA / AOA.
Memorandum of Association and Articles of Association are the 2 public documents which have information about the Company and the Objectives of the Company. They should always be updated as and when any change is made in the Company affairs.
FAQs
Notice for the Board Meeting shall be given at least 7 days prior to the date of the Board Meeting.
Yes, Stamp Duty is payable on the increase in Authorised capital and is applicable as per the Stamp Act/Rules of concerned State/Union Territory
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