Every business requires a steady influx of funds to sustain and expand its operations. Whether for short-term necessities or long-term growth strategies, having access to adequate capital is paramount. For Private Limited Companies, altering the authorized capital is a significant step towards accommodating future financial requirements within the regulatory framework set forth by the Companies Act.

Understanding Authorized Capital

According to Section 2 (8) of the Companies Act 2013, “Authorized Capital” refers to the maximum share capital amount specified in a company’s memorandum.

Authorised vs. Paid-Up Capital

Authorised share capital signifies the maximum value of shares a company can issue, while paid-up capital represents the actual value of shares fully subscribed to and paid for by shareholders. When the paid-up capital approaches the authorized limit, increasing the authorized capital becomes necessary to facilitate further share issuance.

Authorised Share Capital Increase

Expanding the authorized share capital involves amending the company’s Memorandum of Association (MOA) to raise the maximum share capital legally permitted for issuance.

Reasons for Increasing Authorized Share Capital

Companies may opt to increase authorized share capital for various reasons, including addressing financial requirements, funding new ventures, facilitating mergers or acquisitions, or adhering to regulatory mandates.

Documents Required

To formalize an increase in authorized share capital, specific documents such as the amended MOA and resolution approved by shareholders must be submitted to regulatory authorities.