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Increase in Authorized Share Capital

  • Provides the legal headroom to issue new shares to investors, co-founders, or employees via ESOPs.
  • Enables the infusion of fresh equity capital required for business expansion, diversification, or debt repayment.
  • Improves the company's "Borrowing Power" as banks and financial institutions often view a higher authorized capital as a sign of institutional strength.
  • Facilitates the issuance of "Bonus Shares" to existing shareholders by capitalizing the company’s reserves.
  • Facilitates the issuance of "Bonus Shares" to existing shareholders by capitalizing the company’s reserves.
  • Signals growth and long-term commitment to stakeholders, vendors, and international partners.
  • Prevents the company from hitting its statutory issuance limit, ensuring operational flexibility during sudden funding rounds.
  • Optimizes the corporate structure for multi-stage investment rounds (Seed, Series A, etc.) without repeated constitutional delays.

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7 Years

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144 k +

Trusted Clients

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Queries Solved

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3622 +

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144 k +

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Overview

An Increase in Authorized Share Capital is a fundamental constitutional change governed by Sections 13, 61, and 64 of the Companies Act, 2013. The "trigger" for this compliance occurs when the company realizes that its current "Capital Clause" in the Memorandum of Association (MoA) is insufficient to accommodate a proposed new issue of shares. Since a company cannot issue shares beyond its authorized limit, the "ceiling" must be raised first.

In the 2026 MCA V3 regulatory ecosystem, this process is an integrated digital workflow. It requires the payment of "Stamp Duty" to the respective State Government, which is now automated and calculated based on the amount of increase and the state of the registered office. The primary filing for this event is e-Form SH-7.

For the FY 2025–26 cycle, the MCA has linked capital increases with the Audit Trail (Edit Log) compliance. The company must ensure that the accounting software logs the exact date the Board and Shareholders approved the increase. It is also important to note that while the Board can propose the increase, only the Shareholders can approve it through an Ordinary or Special Resolution (depending on the Articles of Association). The countdown for filing is strictly 30 days from the date of the resolution. Missing this deadline is particularly expensive, as the stamp duty and late fees for capital-related forms are among the highest in the MCA fee schedule.

Document Required

Documents
  • 1 Permanent Account Number (PAN) Card of the Company.
  • 2 Aadhaar Card of the Authorized Director.
  • 3 PAN Card of the Authorized Director.
  • 4 Notice of the Extraordinary General Meeting (EGM) with the Explanatory Statement.
  • 5 Certified Copy of the Resolution passed at the EGM.
  • 6 Altered Memorandum of Association (MoA) (highlighting the new Capital Clause).
  • 7 Altered Articles of Association (AoA) (if any changes were made to capital rules).
  • 8 Minutes of the Board Meeting where the increase was first proposed.
  • 9 Proof of Payment of Stamp Duty (Challan generated from the MCA portal).

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Pre-Event Procedures

Step Name Short Description Authority
Board Resolution Approving the proposed increase and calling for an EGM to alter the MoA. Board of Directors
EGM Notice Issuing a 21-day notice (or shorter notice with consent) to members. Company Secretary
Shareholder Approval Passing an Ordinary Resolution (unless AoA requires a Special Resolution). Shareholders
Payment of Stamp Duty Calculation and payment of the additional fee based on the increased amount. MCA V3 (State Govt)

Filing Requirements

Form Name Trigger/Description Countdown Deadline
SH-7 Notice to Registrar of any alteration of Share Capital (Section 64). 30 Days from Resolution
MGT- 14 Required only if a Special Resolution was passed to alter the MoA. 30 Days from Resolution
PAS-3 Separate form filed after the capital is increased to record the actual allotment. 30 Days from Allotment

Penalty and Non-compliance Risk

Penalty and Non-compliance Risk

High Daily Monetary Penalty for late filing of SH-7
Invalidation of any subsequent Share Allotment (PAS-3)
Rejection of the allotment by the ROC due to "Limit Exceeded" error
Deactivation of the Company's ability to file other forms
Personal Liability of Directors for unauthorized capital changes
Suspension of Bank Account updates for new investments
Prosecution for underpayment of State Stamp Duty

FAQs

What is the difference between Authorized and Paid-up Capital?

Authorized capital is the maximum limit of shares a company can issue; Paid-up capital is the amount actually issued and paid for by shareholders.

Does every increase require MGT-14?
Is Stamp Duty the same for all states?
Can we increase capital with "Shorter Notice"?
What is Form SH-7?
Can the authorized capital be reduced later?
Is a Valuation Report required for increasing authorized capital?
What if the company has no "Authorized Capital" (Company limited by guarantee)?
How much time does the ROC take to approve?
What is the "Audit Trail" requirement for 2026?

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Focus on growing your business while we handle the complexities of statutory compliance. From GST filing to Annual Audits, our automated systems ensure you never miss a deadline.

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" Professional, responsive, and very transparent. They explained everything in simple terms and kept the entire process on schedule. "
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" The team ensured our documentation was audit-ready and supported us throughout. Great experience and strong attention to detail. "

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