Increase AuthorisedShare Capital Online

Authorised share capital is the maximum share capital a company can legally issue to its shareholders. It is mentioned in the Capital Clause of the Memorandum of Association and acts as the upper ceiling for share allotment. For example, if a company has authorised capital of ₹1 lakh divided into 10,000 equity shares of ₹10 each, the company cannot issue equity shares beyond that limit until it increases authorised capital through the prescribed ROC process.

This increase is commonly required before investor funding, promoter contribution, rights issue, private placement, preferential allotment, bonus issue, ESOP pool expansion or conversion of debt into equity. It is especially important for startups and growing private companies because funding rounds often require new shares to be issued quickly. If authorised capital is insufficient at the time of closing, the investment process can get delayed until the MOA capital clause is amended and Form SH-7 is filed.

The key point founders must understand is that increasing authorised capital does not automatically increase paid-up capital and does not bring money into the company. It only increases the legal capacity to issue shares. Actual paid-up capital increases later, when the company allots shares and receives consideration. Therefore, authorised capital increase is often the first step in a larger capital transaction — followed by rights issue, private placement, preferential allotment, ESOP exercise or bonus allotment compliance.

The procedure begins with checking whether the company's Articles of Association authorise alteration of share capital. Most modern AOA formats contain this power, but older companies or companies with customised investor articles may have restrictive clauses. If the AOA already permits increase, the company can proceed by calling a board meeting and then placing the matter before shareholders.

The Board of Directors first approves the proposal, the draft altered capital clause, and the notice for general meeting. The shareholders then pass the required resolution in an AGM or EGM. In a standard case, an ordinary resolution is generally sufficient for increasing authorised share capital under Section 61, provided the AOA authorises it. However, if the Articles also need amendment, a special resolution under Section 14 may be required, and MGT-14 filing may become applicable.

After shareholder approval, the company files Form SH-7 with ROC within 30 days, attaching the altered MOA, certified resolution and other supporting documents. Government fee and stamp duty are paid online through the MCA portal. Once filing is completed, the company should maintain the challan, SRN acknowledgement and altered MOA in its statutory records.

SH-7 and PAS-3 are often confused because both relate to share capital, but they serve completely different purposes. SH-7 is filed for alteration of authorised share capital — it increases the ceiling in the MOA. PAS-3 is filed after actual allotment of shares — it reports the increase in issued and paid-up share capital.

Suppose your company currently has authorised capital of ₹1 lakh and paid-up capital of ₹1 lakh. You want to issue shares worth ₹10 lakh to investors. First, you must increase authorised capital to at least ₹10 lakh or more through shareholder approval and SH-7 filing. Only after that can you complete the share issue route and file PAS-3 for the allotment.

This sequencing matters. If shares are allotted before there is enough authorised capital, the allotment may become defective and require corrective filings, professional certification and potentially investor-level documentation corrections. Taxvio plans the filing sequence properly so your capital increase, allotment and ROC records remain aligned.

One of the most practical questions is: how much authorised capital should be increased? The answer depends on your immediate share issue plan and future capital needs. Increasing it only to the minimum required amount may save government fee today but can force another SH-7 filing during the next fundraising round. Increasing it too high may unnecessarily increase statutory cost.

A sensible approach is to estimate the next 12–24 months of planned share issuances: investor allotment, promoter infusion, ESOP pool, bonus issue, conversion instruments and any restructuring transaction. The revised authorised capital should provide enough headroom for these events without being excessive. Taxvio helps calculate the practical capital limit before drafting documents.

Companies should also consider the face value and class of shares. If the company has equity shares of ₹10 each and wants to introduce preference shares, the altered capital clause must reflect the correct break-up between equity and preference shares. Incorrect capital break-up in SH-7 can lead to resubmission or future allotment mismatch.

After SH-7 is filed, the company should update its internal statutory records and maintain the altered MOA with the new Capital Clause. The Board should ensure that all future allotment documents use the revised authorised capital. If the company is moving ahead with fundraising, the next step is to execute the correct allotment route and prepare PAS-3 filing.

For a rights issue, offer letters, renunciation rights, acceptance records and board allotment resolution may be needed. For private placement, valuation, offer letter, bank account trail and PAS-4/PAS-5 records can be relevant. For ESOPs, the company must ensure its ESOP scheme and option pool are approved and that share certificates are issued after exercise and allotment. For bonus shares, reserves, shareholder approval and bonus allotment records must be maintained.

Taxvio provides next-step advisory with every authorised capital increase filing so founders do not stop midway. If your goal is investor funding, we can also assist with valuation support, rights issue, private placement, PAS-3 filing, share certificates and register updates.