Overview

An Authorized share capital determines the maximum number of shares a private business can issue. According to the 2013 New Companies Act, there is no minimum capital increase requirement. The capital clause of the Memorandum of Association is updated by the board approving an ordinary resolution in order to issue additional shares or increase the authorized share capital.

This sum of increase in share capital varies from business to business and could alter, but only with the consent of shareholders. Let’s say a firm has an authorized capital of ₹2 lakhs; in that case, it follows that it can issue shares for up to ₹2 lakhs. However, because it is flexible, this allowed capital may be increased or decreased as needed. Let’s imagine a firm has ₹1 lakh in allowed capital, but an investor wishes to put in ₹1 crore. In this case, the company can raise its authorized capital to ₹1 crore. The permitted share capital increase for company registration is covered here.

Guidelines For Increase In Authorized Share Capital

Here are the few guidelines one must know about increase authorized capital:

• ₹5 lakhs for including the phrases Hindustan, Bharat, and India in the company name.
• ₹10 lakhs for the use of the phrases ‘Enterprise’, ‘Products’, ‘Business’, and ‘Manufacturing’ in the company name.
• ₹10 lakhs for the use of the phrases ‘Enterprise’, ‘Products’, ‘Business’, and ‘Manufacturing’ in the company name. ₹50 lakhs for the use of the phrases global, intercontinental, continental, Asian, and international in the company’s name.
• Bharat, Hindustan, and India were paid ₹50 lakhs to be the first word in the firm name.
• For employing words like ‘international’, ‘global’, ‘universal’, ‘continental’, ‘intercontinental’, ‘asiatic’, and ‘industry’ anywhere in the firm name, as well as ‘udhyog’ and ‘industry’, the fine is ₹1 crore.
• ₹ 5 Crore if the company name contains the word ‘Corporation’ even once.

Importance Of Increasing Authorised Share Capital

A firm may only raise money from the public up to its share capital increase. You must raise your company’s increase authorised capital in order to raise money from the public.

Benefits Of Increasing Authorised Capital

Increase Authorised Capital

A company can raise whatever authorised capital as they decide upon and the same will be mentioned in the MoA with revisions. Hence, increasing authorised capital has an incremental effect on the overall company share capital.

Enhances Borrowing Capacity

With the increase in share capital, the company’s overall net worth also increases. This further enhances the borrowing capacity of the company.

It could invite investments as the same can be easily accommodated if there is enough authorised capital.