Increase in Authorised Share Capital in India
Increase in Authorised Capital under Companies Act, 2013
Starting at ₹4,999 + GST & Govt Fees
As startups and growing businesses expand, they often need to raise funds, issue new shares, or onboard investors. Before issuing additional shares, a company must ensure that its Authorised Share Capital is sufficient.
Under the Companies Act, 2013, a company cannot issue shares beyond its authorised limit unless it formally increases its authorised share capital and files the necessary forms with the Registrar of Companies (ROC).
What’s included in your LLP Registration PackageThe increase is legally valid only after approvals, payment of statutory fees and stamp duty, and ROC filing. Increase in Authorised Share Capital
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What is Authorised Share Capital?
Authorised Share Capital is the maximum amount of share capital that a company is allowed to issue, as stated in its Memorandum of Association (MOA).
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Think of it as a legal ceiling:
Shares can be issued only up to this limit
To issue more shares, the limit must be increased first
Increasing authorised capital does not mean shares are issued automatically. It only increases the company’s capacity to issue shares in the future.
When is Increase in Authorised Capital Required?
A company must increase its authorised share capital in cases such as:
Raising funds from angel or venture investors
Issuing fresh equity shares
Rights issue or private placement
Issuing ESOPs to founders or employees
Conversion of loans or debentures into equity
Business expansion or restructuring
If the proposed share issue exceeds the existing authorised capital, the increase must be completed before issuing shares.
Practical Examples of Increase in Authorised Capital
Example 1: Angel Funding Round
- A startup is incorporated with an authorised capital of ₹1,00,000. Later, it plans to raise ₹10 lakhs from angel investors.
- 👉 Since the authorised capital is insufficient, the company must first increase its authorised share capital to at least ₹10,00,000 before issuing shares.
Example 2: ESOPs for Employees
- A startup wants to issue ESOPs to employees, but the total number of shares proposed exceeds the existing authorised capital.
- 👉 Before issuing ESOPs, the authorised capital must be increased and updated with the ROC.
Example 3: Loan Conversion into Equity
- A company plans to convert a promoter loan into equity shares. If the authorised capital is not sufficient to cover the conversion, it must be increased before the conversion takes place.
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Business Structure Comparison – At a Glance
| Particulars | Authorised Share Capital | Paid-Up Share Capital |
|---|---|---|
| Meaning | Maximum capital the company is permitted to issue | Actual capital raised by issuing shares |
| Purpose | Sets the legal upper limit for issuing shares | Represents ownership and funds received |
| Mentioned in | Memorandum of Association (MOA) | Share certificates & MCA filings |
| Can it change? | Yes, by passing resolutions and filing with ROC | Yes, when shares are issued |
| Does it bring money into company? | ❌ No | ✅ Yes |
| Does it dilute ownership? | ❌ No | ✅ Yes (when new shares are issued) |
| Can it exceed authorised capital? | ❌ Never | ❌ Not allowed |
Step-by-Step Legal Process for Increase in Authorised Share Capital
This is the statutory process followed under the Companies Act, 2013.All resolutions, documents, and filings mentioned below are drafted and handled as part of the service.
Step 1
Check Articles of Association (AOA)
The company’s Articles of Association are reviewed to confirm whether an increase in authorised share capital is permitted. If required, the Articles are amended before proceeding.
📄 Related document: Altered Articles (only if needed)
Step 2
Board Approval
A meeting of the Board of Directors is held to:
A meeting of the Board of Directors is held to: • Approve the proposal for increase in authorised capital, and • Authorise calling of a general meeting of shareholders.
📄 Related document: Board Resolution
Step 3
Shareholders’ Approval
Shareholders pass a Special Resolution approving:
- Increase in authorised share capital, and
- Alteration of the capital clause in the Memorandum of Association.
Related document: Shareholders’ Special Resolution
Related document: Altered Memorandum of Association (MOA)
Step 4
Statutory Filing with ROC
The prescribed form (Form SH-7) is filed with the Registrar of Companies along with:
- Altered MOA
- Board and Shareholders’ resolutions
📄 Related document: Form SH-7 (ROC filing)
Step 5
Payment of Government Fees
Applicable ROC filing fees and stamp duty are paid as per:
- The amount of increase, and
- The company’s state of registration.
📄 Related requirement: Proof of payment (generated through MCA)
Step 6
ROC Updates Company Records
Upon verification, the Registrar records the increase and updates the company’s authorised capital in the MCA database.
📄 Outcome: Updated authorised capital reflected on MCA portal
Cost for Increasing Authorised Share Capital
Increasing authorised share capital involves paying mandatory government fees at the time of filing the required form with the Registrar of Companies (ROC). These are statutory charges and apply to every company, regardless of size.
What Government Fees Are Payable?
The total cost usually includes the following:
1. ROC Filing Fees
- ROC fees are paid while filing Form SH-7.
- The amount is calculated based on the revised authorised capital after the increase and follows the fee slabs prescribed by the Ministry of Corporate Affairs.
- In simple terms, a higher authorised capital results in a higher ROC filing fee. Only the additional fee due to the increase is payable.
2. Stamp Duty
- Stamp duty is payable on:
- The increase in authorised share capital, and
- The altered Memorandum of Association
- Stamp duty is payable as per the stamp laws of the state where the company is registered and can be calculated in advance. The duty amount is paid at the time of filing the prescribed form with the MCA.
Approximate Cost Examples
- Below are illustrative examples to give you a practical idea of the government charges involved.
Example 1: Early-Stage Startup
- Current Authorised Capital: ₹1,00,000
- Proposed Authorised Capital: ₹10,00,000
- Increase Amount: ₹9,00,000
- Indicative Government Charges:
- ROC filing fees: ₹1,000 – ₹2,000
- Stamp duty (state-wise): ₹500 – ₹1,500
- Total Government Cost: Usually around ₹1,500 – ₹3,500
- This scenario is common when a startup is preparing for its first round of funding.
Example 2: Growing Company
- Current Authorised Capital: ₹10,00,000
- Proposed Authorised Capital: ₹50,00,000
- Increase Amount: ₹40,00,000
- Indicative Government Charges:
- ROC filing fees: ₹3,000 – ₹6,000
- Stamp duty: ₹2,000 – ₹5,000
- Total Government Cost: Usually around ₹5,000 – ₹10,000
- Such increases are typically done before bringing in angel investors or institutional funding.
- Note: The above figures are indicative. Actual government fees may vary based on the company’s registered state, type of company, and applicable MCA fee slabs.
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Documents Required
To increase the authorised share capital of a company, certain statutory approvals and documents are required under the Companies Act, 2013. All resolutions and statutory documents are drafted and handled as part of the process.
Key Documents & Approvals
Board Resolution approving the increase in authorised share capital
Shareholders’ Special Resolution (where required) authorising alteration of the capital clause of the Memorandum of Association
Altered Memorandum of Association (MOA) reflecting the revised authorised share capital
Digital Signature Certificate (DSC) of an authorised Director for filing with ROC
Basic company details (such as existing authorised capital and registered state)
What the Client Needs to Do
Approve the resolutions
Provide necessary confirmations
All drafting, filings, and compliance steps are managed end-to-end to ensure timely and accurate completion.
Common Mistakes to Avoid
Issuing shares without increasing authorised capital
Delaying SH-7 filing with ROC
Ignoring state-wise stamp duty
Confusing authorised capital with paid-up capital
FAQs on Increase in Authorised Share Capital
Authorized share capital is the maximum amount of capital a company is legally permitted to issue through shares, as mentioned in its Memorandum of Association.
Companies increase authorised capital when they want to:
- Raise funds from investors
- Issue additional shares to founders or shareholders
- Offer ESOPs
- Convert loans into equity
Shares cannot be issued beyond the authorised capital limit.
No. Increasing authorised capital only increases the limit for issuing shares.
Money comes into the company only when shares are actually issued and paid for.
No. Increasing authorised capital does not dilute ownership.
Dilution happens only when new shares are issued to investors or shareholders.
Yes. A Special Resolution of shareholders is required to alter the capital clause of the Memorandum of Association.
Yes. There is no restriction on the number of times authorised capital can be increased, subject to compliance with the Companies Act, 2013.
Form SH-7 is filed with the Registrar of Companies to record the increase in authorised share capital.
Yes. Stamp duty is payable on the increase in authorised share capital as per the stamp laws of the state where the company is registered.
The government cost depends on:
- The amount of capital increase
- The company’s state of registration
For most startups, the one-time government fees are usually a few thousand rupees.
In most cases, the increase in authorised capital is completed within 3–7 working days, subject to timely approvals and ROC processing.
No. Issuing shares beyond the existing authorised capital is not permitted.
Authorised capital must be increased before issuing additional shares.
The increase is recognised after:
- Shareholder approval, and
- Filing Form SH-7 with the ROC and updation of MCA records
Only then can the revised authorised capital be acted upon.
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