Procedure for Increase in Authorize share Capital
Authorization in Article is must for Increase: For Increase in Authorize Share Capital, the company has to make sure that its Articles of Association contain a provision authorizing it to increase its authorized share capital. Reason being Section 61 of the Companies Act, 2013, mandates that for increasing the Authorized share capital, authorization in Articles of Association is a pre-condition.
In other words Company has to make sure that its Articles of Association contain a provision authorizing it to increase its authorized share capital.
So first check whether there is enabling provision in the Articles of Association regarding increase in authorized share capital.
If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the Authorized share capital of the Company.
Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. Main agenda for this Board meeting would be:
a. To Get in-principal approval of Directors for Increase in authorized share Capital;
b. Fix date, time and place for holding Extra-ordinary General meeting (EGM) to get approval of shareholders, by way of Ordinary Resolution, for amendment in authorized share Capital clause of Memorandum of Association. This amendment in authorized share Capital clause of Memorandum of Association shall be in accordance with the requirement of section 61 of the Companies Act, 2013;
c. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;
d. To authorize the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the board under clause 2(c) mentioned above.
Issue Notice of the Extra-ordinary General meeting (EGM) to all Members, Directors and the Auditors of the company in accordance with the provisions of Section 101 of the Companies Act, 2013;
Holding of General Meeting: Hold the Extra-ordinary General meeting (EGM) on due date and pass the necessary Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, for increase in authorize share capital of the Company.
ROC Form filing: File form SH-7 within 30 days of passing of Ordinary Resolution with the concerned Registrar of Companies, with prescribed fees and along with following attachments as desired by section 64:
a. Notice of EGM;
b. Certified True copy of Ordinary Resolution;
c. Altered Memorandum of Association.
Concerned Registrar of Companies (ROC) will check the E-forms and attached documents and will approve the increase in authorize share capital.
Notice to be given to Registrar for alteration of share capital.
As per section 64 of the Companies Act, 2013, where a company alters its share capital for increase in authorised share capital in accordance with sub-section (1) of section 61, the company shall file a notice in the prescribed form with the Registrar within a period of thirty days of such increase along with a copy of altered Memorandum.
No need to pass Special Resolution for increase in authorized share capital
Some professionals are of the view that for increase in authorized share capital Special Resolution is to be passed, since amendment in Memorandum of Association can be done by way of passing Special Resolution under section 13 of the Companies Act, 2013.
Kindly appreciate amendment in Memorandum of Association by way of passing Special Resolution is required only when there is a change in particular clause of MOA like alteration in name clause or alteration in registered office clause, as envisaged in Section 13.
Amendment in capital clause of Memorandum of Association for the purpose of increase in authorized share capital is exclusively governed by Section 61of the Companies Act, 2013 and section 61 is silent about the nature of shareholders’ resolution. So in the above scenario an Ordinary Resolution would be enough for increase in authorized share capital.
