FAQ on Change in Authorized Capital


1. What is authorized capital?
Authorized capital refers to the maximum amount of capital a company can raise through the issuance of shares, as defined in its Memorandum of Association (MOA). It sets the upper limit for the company’s share capital but does not necessarily mean the company has to raise this entire amount. 

2. Why would a company increase its authorized capital?
A company may decide to increase its authorized capital to accommodate growth, raise additional funds, or issue more shares. As the company expands or takes on new projects, increasing authorized capital allows for more flexibility in raising funds from existing or new shareholders.

3. What is the process for increasing authorized capital?
The process begins with the Board of Directors passing a resolution to propose the increase in authorized capital. Once this is done, an Extraordinary General Meeting (EGM) must be called to seek shareholder approval. During the EGM, shareholders pass a special resolution approving the increase.

4. What documents are needed to increase authorized capital?
To increase the authorized capital, a Board resolution must be passed by the Directors to approve the increase. A special resolution by shareholders must be passed during the EGM, and this needs to be documented and filed.

5. Are there any fees associated with increasing authorized capital?
Yes, there are fees associated with filing the necessary forms, such as Form SH-7, with the ROC. In addition, stamp duty may be required on the increased authorized capital, which varies based on the amount of the increase and the state laws governing such filings.

6. How long does the process take?
The process typically takes a few weeks, depending on how quickly the necessary resolutions are passed, the EGM is conducted, and the filings are made. The filing with the ROC can usually take 7 to 10 days, but the overall timeline may be longer if there are delays in the approval process or if additional documents are needed.

7. Can authorized capital be reduced once increased?
Yes, authorized capital can be reduced if necessary, but the process is similar to increasing capital. It requires shareholder approval through a special resolution and must be filed with the ROC. The company would also need to amend its Memorandum of Association to reflect the change in capital.