Every company has a ceiling on how many shares it's legally allowed to issue, set out in its Memorandum of Association. That ceiling is the authorized capital, and it's easy to confuse with paid-up capital — the two get used almost interchangeably in casual conversation, but they mean genuinely different things, and mixing them up is where a lot of confusion around this process starts.
Here's what authorized capital actually is, when you need to raise it, and the process under Section 61 of the Companies Act, 2013 — which, contrary to what a lot of people assume, doesn't need the higher voting threshold most capital-related changes require.
Authorized capital is the maximum value of shares a company is permitted to issue, as stated in Clause V of its Memorandum of Association. Paid-up capital is what's actually been issued and paid for by shareholders so far. A company might have an authorized capital of ₹1 crore but have only issued ₹40 lakh worth of shares — the remaining ₹60 lakh is headroom it hasn't used yet.
You need to increase authorized capital specifically when you want to issue new shares that would take your paid-up capital beyond the existing ceiling — most commonly ahead of a funding round, when bringing on a new investor, or when converting a loan into equity. If you're staying within your existing authorized limit, you don't need this process at all; you'd simply be allotting new shares within the room you already have.
This surprises people who've dealt with other capital-related company actions, most of which do require a special resolution. Section 61(1)(a) is different: increasing authorized capital only needs an ordinary resolution passed by a simple majority at a general meeting, provided your Articles of Association already contain a clause permitting the increase.
That "provided" matters. If your Articles don't have that enabling clause — or worse, if they cap authorized capital at a specific figure — you'll need to amend the Articles first, and altering Articles always requires a special resolution under Section 14, which in turn has to be filed with the Registrar in Form MGT-14. Skip checking this upfront, and you can end up passing a resolution that turns out to be invalid because the Articles didn't actually permit it.
Step 1 — Check the Articles first. Before calling any meeting, confirm the Articles of Association actually authorise a capital increase. This single check determines whether you're on the simpler path (ordinary resolution only) or need the extra Article-amendment step first.
Step 2 — Convene a board meeting. Directors need at least seven days' notice under Section 173(3). At this meeting, the board approves the proposal, signs off on the draft alteration to Clause V of the MoA, and fixes a date for the general meeting where shareholders will vote.
Step 3 — Hold the general meeting and pass the resolution. Shareholders pass an ordinary resolution under Section 61(1)(a), approving both the increase and the corresponding change to the capital clause in the MoA. A simple majority — more votes in favour than against — is enough.
Step 4 — File Form SH-7. This has to be filed with the Registrar within 30 days of the resolution being passed, under Section 64. The current MCA portal has folded MoA alteration directly into this form, so the updated memorandum gets submitted electronically alongside the filing itself.
Step 5 — Pay the ROC fee and stamp duty. The Registrar's fee is calculated on a slab basis — essentially the difference between the fee applicable to your new authorized capital and what applied to your old one — and there's a separate, state-specific stamp duty on top of it, paid electronically along with the SH-7 filing.
Step 6 — File MGT-14, but only if it applies. If you had to amend the Articles first because they didn't already permit the increase, that amendment — being a special resolution — needs to be separately filed in Form MGT-14 within 30 days. If your Articles already had the enabling clause, this step simply doesn't apply, and SH-7 alone completes the filing obligation.
No. Under Section 61(1)(a) of the Companies Act, 2013, an ordinary resolution passed by a simple majority is sufficient, provided the Articles of Association already contain a clause authorising the increase.
Authorized capital is the maximum value of shares a company is legally permitted to issue, as stated in the Memorandum of Association. Paid-up capital is the portion of that ceiling actually issued and paid for by shareholders so far.
No. It's only required if the Articles of Association needed to be amended first because they didn't already permit the increase, since altering Articles is a special resolution under Section 14, and special resolutions must be filed in MGT-14.
Thirty days from the date the resolution is passed, under Section 64 of the Companies Act, 2013. Missing this window attracts additional late filing fees.
Not by itself. Dilution happens when new shares are actually issued and allotted to someone, not simply because the company's authorized ceiling has been raised. A company can increase its authorized capital and leave the additional headroom unused for as long as it wants.
It's charged on a slab basis, essentially the difference between the fee applicable to the new authorized capital and what applied to the previous amount, with a separate state-specific stamp duty added on top, payable electronically alongside the SH-7 filing.