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Increasing the authorized capital of a company involves the process of raising the maximum amount of share capital that the company is allowed to issue. This process typically requires a board resolution, approval from shareholders, and filing the necessary forms with the Registrar of Companies (ROC). The increase in authorized capital is often undertaken to facilitate future growth, issue new shares, or meet business expansion requirements.
5 May 2024
Afinthrive Advisory
In relation to a company, Authorized Capital is the amount mentioned in the capital clause of the Memorandum of Association of the company. The authorized capital of a Company determines the number of shares a Company can issue to its shareholders. To the extent of the amount specified in a capital clause, the company can raise capital. If the company wants more capital then the capital clause has to be amended by the members by passing a special resolution at a general meeting. An increase in the authorized capital might as well be required for issuing new shares and/or infusing more capital into the Company.
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Learn the key steps to legally increase your company’s authorized capital and fuel business growth.
Before increasing the authorized capital, evaluate the financial requirements of your business and the potential benefits of raising more funds.
Assess the Need for an Increase
Ensure your company’s Articles of Association (AoA) permit the increase. If necessary, amend them before proceeding.
Review Your Articles of Association
Determine the exact amount of capital you need to raise and how it will affect your company’s structure and operations.
Decide the Amount of Capital Increase
Obtain approval from the board of directors and shareholders as per the company’s internal governance rules.
Gather Necessary Approvals
Once approvals are in place, submit the necessary forms, resolutions, and updated documents to the Registrar of Companies for approval.
File with the Registrar of Companies (RoC)
Following the authorized capital increase, ensure all public filings, financial reports, and shareholder records reflect the updated capital structure.
Update Financial Statements and Public Disclosures
Get Answers to your most asked questions.
Authorized capital is the maximum amount of capital that a company is legally allowed to raise through the issuance of shares as per its constitutional documents.
A company may need to increase its authorized capital to raise more funds for business expansion, investing in new projects, or improving financial stability.
To increase authorized capital, the company must obtain approval from its shareholders and board of directors, amend the Articles of Association, and file necessary documents with the Registrar of Companies (RoC).
The company needs to submit a special resolution passed by shareholders, updated Articles of Association, and other necessary filings with the Registrar of Companies (RoC).
Yes, a company can increase its authorized capital multiple times, as long as the legal procedures are followed and approvals are obtained.
Yes, increasing authorized capital typically requires approval from the shareholders, which is obtained through a special resolution passed in a general meeting.
Increasing authorized capital may result in issuing new shares, potentially diluting the existing shareholders' ownership unless they are given the option to subscribe to the new shares.
Yes, there may be a fee for filing the necessary documents with the Registrar of Companies (RoC) and updating company records. The fee depends on the increase in capital and relevant government charges.
