What is the necessity to increase the authorized capital of a company?

A startup company usually starts with a low authorized capital. But as to expand the company and raise the shares of your company, the authorized capital has to be increased. For this, you need to call a board meeting, pass the resolution fill the consent form for the same and get your authorized capital raised.

Procedure for increasing authorized capital of your company –

  • Approval in articles of association – for increasing the authorized capital of your company approval from articles of association is compulsory. Verification has to be done that you have got the approval from articles of association. This law is stated in section 61 of the companies’ act 2013.
  • Board meeting – a meeting is important to inform and decided on the concept of an increase in authorized capital. The board resolution is also submitted for increasing the capital that is authorized for your company.
  • General meeting – along with the board meeting general meeting is also essential for the verification of an increase in the authorized capital of the company.
  • Documentation – within a month after the commencement of the meeting, the documents are to be submitted. From SH-7 is required to be filled in the authorization of registrar of companies. along with the form – charges of the form and other necessary documentation is to submitted which is given under section 64 like – board resolution, board resolution for the alteration in a memorandum of association and articles of association and approval from shareholders.

This form is to be submitted to the registrar of companies which will then verify all the details and clause for increment in authorized capital. After the verification, if the documents and other filled details are correct you will get approval for an increase in the capital.

Advantages of increasing authorized capital of your company –

  • Banks prefer companies with high authorized capital at the time of issuing the loan.
  • It lowers the risk of your company becoming bankrupt
  • Prices of the shares of that company will increase
  • It will increase the number of shares you can issue to your shareholders
  • It will increase the value of your company and also fulfill the requirement of the money to expand your business
  • As now there is more cash with the company, you can attract various investors and shareholders
  • It makes it easy to allot shares and funding at the time of need.

There are many more benefits that can be reaped by a company by increasing its shares via enhancement or increment in its authorized capital.

Provision to articles of association is very much required to increase the authorized capital of your company. For transferring shares to new shareholders from existing shareholders, you need a good amount of authorized capital. That may be the time you need to do this task.
Choose Qiklegal for helping you out in the process of increase in the authorized capital. We will take care of all the documents and verification processes required.