What does Authorized Share Capital mean?
For incorporating the company, it must be registered with an amount i.e. initial capital which is known as Authorized share capital with Registrar of Companies (ROC) and is also the maximum capital amount which can be raised through the issue of shares to its shareholders by the company. The capital of the company must be within the Authorized Capital not beyond that.
What is the need to Increase authorized share capital?
In order to expand the business and its activities and to be able to meet its business expenditures, company may require more funds which is only possible by increasing the authorized share capital. Articles of Association (AOA) of the company prescribes the provision which is to be followed for increasing the authorized capital and if it is not mentioned there, then such Articles of Association (AOA) needs to be altered.
How to increase the authorized share capital?
Below mentioned steps are required to be followed in order to increase the authorized capital:
- In the first step, alteration of Articles of Association should be done if provision related to the increase in authorized capital is not mentioned.
- Director's approval in Board meeting as well the membersâ€™ approval in the General Meeting needs to be obtained before increasing the authorized capital.
- For increasing the authorized capital, prescribed forms are required to be filed to Registrar of Companies (ROC) along with all necessary documents.