A company may increase its authorised share capital before issuing new equity shares and increasing paid-up capital. The share capital is that important part of the company’s equity which is raised by issuing shares and selling them to stockholders in exchange for capital.
Authorised share capital is referred to as the total value of shares a company can issue.
Paid-up capital refers to the total value of shares the company has issued. Paid-up capital can never exceed authorised capital.
Sometimes it may happen that a company needs to increase authorized capital in order to issue new shares for more capital. It is mandatory to mention the provisions of increase authorised capital in AOA before applying for increasing authorized capital by passing a special resolution. Once the resolution is passed in the meeting, Form SH-7 must be filed by the company within 30 days of the passing of ordinary resolution. The necessary documents to be filed along with Form SH-7 are as follows:
a. Notice related to EGM
b. Authorized true copy of ordinary resolution
c. Changed Memorandum of Association and Articles of Association
According to the Companies Act and Companies Rules if the procedures for increasing authorised capital are followed then the Registrar would approve the filing and increase the authorised share capital of the company.
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