Increase in Authorised Share Capital

Section 61 of the Companies Act, 2013 empowers a company, if authorised by its articles, to alter its share capital by an ordinary resolution passed in general meeting — including increasing its authorised share capital by issuing new shares, consolidating or sub-dividing existing shares, converting fully paid-up shares into stock (or vice versa), and cancelling unissued shares. Any such alteration must be consistent with the company's Memorandum of Association; where the Memorandum itself caps authorised capital below the desired level, the Memorandum must first be amended.

Section 64(1) requires the company to file notice of the alteration with the Registrar of Companies within 30 days of the alteration, in Form SH-7, together with the altered Memorandum of Association and the requisite filing fee computed on the incremental authorised capital, as prescribed under the Companies (Registration Offices and Fees) Rules, 2014. Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014 prescribes procedural requirements for consolidation, sub-division and other capital alterations undertaken alongside an increase.

Failure to file Form SH-7 within the prescribed period attracts penalty under Section 64(2): the company and every officer in default are liable to a penalty, along with additional filing fees on a slab basis for delayed filing under the Companies (Registration Offices and Fees) Rules, 2014. This filing is distinct from, and should not be confused with, Form SH-4, used for share transfer under Section 56.

An increase in the authorised share capital expands the ceiling on the shares a company may issue by altering the capital clause of its Memorandum. The power is under Section 61(1)(a) of the Companies Act 2013, exercised by a special resolution of the members, and the change is filed with the Registrar of Companies in Form SH-7 under Rule 31 of the Companies (Incorporation) Rules 2014 within thirty days of the resolution, with the state stamp duty on the increase paid as part of the filing. The authorised capital is the company's declared equity capacity.

The authorised capital matters the moment the company needs to issue shares. Every allotment — the investors, the ESOPs, the convertible instruments converted — must fit within the authorised ceiling, and a company that has exhausted it cannot proceed until the increase is filed and registered. In a live funding round, the increase is on the critical path: the term sheet, the valuation and the subscription all wait on the ceiling being raised.

The cost of the unraised ceiling is the stalled transaction: the investment that cannot be subscribed, the ESOP grant that cannot be made, the conversion that cannot happen — each blocked by a filing that should have been done before the deal. The increase is routine; the failure to do it in time is not.

This service is for companies increasing their equity capacity. We compute the increase and the share split needed under Section 61, draft and pass the board and the special resolutions, prepare the altered MoA, pay the stamp duty, and file the SH-7 under Rule 31 of the Companies (Incorporation) Rules 2014 — closing the filing before the transaction needs the headroom.