Increasing authorized capital.
Authorized capital is the ceiling a company is permitted to issue shares up to. It is not money, it is not raised, and it earns nothing — but no allotment can cross it. When an investor is waiting and the ceiling is ₹1 lakh, the increase becomes the thing standing between a signed term sheet and a completed round.
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Two questions decide how hard this is.
The first question is whether the articles permit it. Section 61 allows a company limited by share capital to increase its authorized capital only if the articles authorise it to do so. Most modern articles carry that power. Articles drafted decades ago, or adopted from a Companies Act 1956 template and never revisited, sometimes do not — and where the power is missing, the articles have to be altered first under Section 14, which needs a special resolution and an MGT-14 filing.
Skipping that check is the single most common reason an increase is done twice. The Registrar does not always catch it, which is worse, not better: the defect surfaces in due diligence years later, when a buyer's lawyer reads the articles and asks under what power the capital was increased.
The second question is what the increase will cost. Two amounts are payable and they are computed differently. The MCA fee is slab-based on the new authorized capital, charged as the difference between the fee payable on the new ceiling and the fee already paid on the existing one. Stamp duty is a state charge, computed under the Goa Stamp Act on the increased amount.
Because the fee steps up in slabs, the increment matters. Going from ₹1 lakh to ₹10 lakh and going from ₹1 lakh to ₹1 crore are not remotely the same cost, and a company that will need ₹1 crore within eighteen months is usually better served raising the ceiling once than twice.
Four kinds of capital, and only one of them is money.
These terms get used interchangeably in conversation and mean four different things on a balance sheet.
| Term | What it is | Changed by |
|---|---|---|
| Authorized capital | The maximum share capital the company is permitted to issue, stated in the capital clause of the memorandum | Members' resolution and SH-7 — this page |
| Issued capital | The part of the authorized capital the company has actually offered to anyone | Board and members' action to issue shares |
| Subscribed capital | The part of the issued capital that has been taken up by shareholders | Acceptance of the offer |
| Paid-up capital | The amount actually received against the subscribed shares — the figure that appears in the accounts | Allotment and receipt of money — see increase in paid-up capital |
Raising authorized capital brings no money into the company and does not change any shareholder's holding. It only moves the ceiling. The money and the dilution happen at the next stage, when shares are issued and allotted within that ceiling.
Six ways this gets done badly.
None of them are complicated. All of them are expensive to unwind.
Nobody read the articles first
Section 61 permits the increase only where the articles authorise it. If they do not, the correct sequence is a special resolution altering the articles under Section 14, MGT-14 filed within thirty days, and only then the increase. Doing it in the wrong order produces a resolution passed without power — a defect that resurfaces in every future due diligence.
The general meeting was not properly called
An extraordinary general meeting needs twenty-one clear days' notice unless shorter notice is consented to in the manner the Act prescribes. Clear days means excluding the day of sending and the day of the meeting. Notices dated to give exactly twenty-one days routinely fall a day short, and a resolution passed at an invalidly convened meeting is open to challenge.
SH-7 is filed late
Notice of the alteration has to reach the Registrar in SH-7 within thirty days of the resolution. Late filing attracts a per-day penalty under Section 64 subject to a prescribed maximum, on the company and on every officer in default. It is a penalty for missing a date, which makes it the least defensible cost in the whole exercise.
The increment is too small
Increasing from ₹1 lakh to ₹5 lakh because that is what this month's allotment needs means paying fee, duty and professional cost again in a year. The ceiling should be set against the eighteen-to-twenty-four month plan, not against the immediate allotment, because the marginal cost of a higher ceiling at the time of filing is usually far lower than the cost of a second round.
The memorandum and articles are never actually amended
The resolution alters the capital clause; the documents have to be reprinted to match. Section 15 requires every copy of the memorandum issued after an alteration to carry it, with a penalty for each copy issued without. Companies routinely file SH-7 and then keep circulating the original memorandum for years.
Stamp duty is computed on the wrong basis
Duty on an increase in authorized capital is charged by the state where the registered office is situated. For a Goa company that is the Goa Stamp Act, not the rate a Mumbai or Bengaluru checklist quotes. Under-paying is a defect on the file; over-paying is simply money gone.
What an increase actually costs.
Three components, only one of which is professional fee.
| Component | How it is computed | Payable to |
|---|---|---|
| MCA registration fee | Slab-based on the new authorized capital, charged as the fee on the new ceiling less the fee already paid on the existing one. The slab rate falls as capital rises, so the marginal cost of each additional lakh reduces | Ministry of Corporate Affairs, with the SH-7 filing |
| Stamp duty | Charged on the increased amount under the stamp law of the state of the registered office — the Goa Stamp Act for a Goa company. Rates and any ceiling differ materially between states | State government, collected through the MCA portal |
| Professional and filing cost | Drafting the notice, explanatory statement and resolutions, the certification on SH-7, and the amendment of the memorandum and articles | The practice |
Fee slabs and state duty rates are revised from time to time and small companies and one person companies are charged on a different scale. The exact figure for your increase is computed at the point of filing against the current tables rather than quoted from a static list.
From board meeting to amended memorandum.
Read the articles
Before anything is drafted, the articles are checked for the power to increase capital and for any internal ceiling written into them. If the power is absent, the alteration of the articles is built into the same notice so the members deal with both at one meeting rather than two.
Board meeting
The board approves the proposed increase, approves the alteration of the capital clause, and calls the extraordinary general meeting — fixing the day, time, place and the notice, with the explanatory statement setting out the reason for the increase.
Notice of the general meeting
Twenty-one clear days' notice is issued to every member, director and auditor, unless shorter notice is validly consented to. Where consent to shorter notice is being used, it is obtained in writing before the meeting, not reconstructed afterwards.
The general meeting
Members pass the ordinary resolution increasing the authorized capital and altering the capital clause of the memorandum — and, where required, the special resolution altering the articles. Attendance, quorum and voting are minuted properly, because the minutes are the evidence.
File SH-7, and MGT-14 if required
SH-7 goes to the Registrar within thirty days of the resolution, with the altered memorandum, the resolution and the minutes attached, and the fee and stamp duty paid on filing. Where a special resolution was passed to alter the articles, MGT-14 is filed within thirty days as well.
Amend the documents and hand over
The memorandum and articles are reprinted to reflect the new capital clause, the statutory registers are updated, and you receive the filed forms, the challans and the amended constitutional documents in a form you can hand to a bank, an investor or an auditor.
What you receive.
Four things to start.
The constitutional documents
The current memorandum and articles as they stand today, including every earlier alteration.
- Certificate of incorporation and CIN
- Memorandum and articles, latest version
- Any earlier SH-7 or MGT-14 filed
The target figure
The new ceiling, and the reason for it. The reason shapes both the explanatory statement and the advice on quantum.
- Existing authorized and paid-up capital
- The proposed new ceiling
- What the headroom is for, and by when
Shareholder and board details
Who has to be given notice, who has to sign, and whose digital signature will be used.
- Current shareholding pattern
- Directors, with DIN and DSC status
- Whether all members will consent to shorter notice
What comes next
The increase is rarely the objective. Knowing the allotment that follows lets both steps be sequenced as one exercise.
- Rights issue, private placement, bonus or conversion
- Whether any subscriber is non-resident
- Any term sheet or investment agreement deadline
What prompts this in Goa.
A second property, a lease premium or a fit-out programme is usually funded by fresh equity from the existing promoters. The ceiling set at incorporation, often ₹1 lakh, stops that on the day the money is ready to come in.
Companies that funded themselves for years on unsecured loans from directors frequently want them converted to equity before an audit or a bank sanction. Conversion is an allotment, and an allotment needs headroom.
Sanction terms and tender criteria are often written against net worth or paid-up capital. Raising the ceiling is the precondition, but the ceiling alone changes neither figure — the allotment does.
A term sheet that assumes a certain post-money capital table cannot be implemented above the existing ceiling. Where a closing date is fixed, the increase has to be started weeks earlier, not in the closing week.
Duty is charged under the Goa Stamp Act on the increase. Checklists circulated by advisers in other states quote different rates and different ceilings, and copying them produces either a shortfall or a needless overpayment.
Usually needed alongside this.
Authorized capital, answered.
What is the difference between authorized and paid-up capital?
Authorized capital is the ceiling. It is the maximum share capital the company is permitted to issue, stated in the capital clause of the memorandum. It is not money and it does not sit anywhere.
Paid-up capital is the amount actually received from shareholders against shares issued and allotted to them. It appears in the balance sheet, it affects net worth, and it is the figure banks and tender authorities look at. Raising the ceiling changes nothing on the balance sheet — only the allotment that follows does.
What resolution is needed to increase authorized capital?
An ordinary resolution of the members, passed at a general meeting, provided the articles authorise the company to increase its capital.
Where the articles contain no such power, a special resolution altering the articles under Section 14 has to be passed first, and MGT-14 filed for it within thirty days. Both items can be put on the same notice and dealt with at the same meeting, which is the usual approach when the articles turn out to be silent.
Which form is filed, and within how long?
SH-7, within thirty days of the resolution, along with the altered memorandum, the resolution and the minutes. The MCA fee on the increased capital and the state stamp duty are paid at the point of filing.
Where a special resolution was also passed — to alter the articles, for example — MGT-14 is filed separately, also within thirty days. Late filing of SH-7 attracts a per-day penalty under Section 64 on the company and on every officer in default, subject to a prescribed maximum.
How much does it cost to increase authorized capital?
Three components. The MCA fee is slab-based on the new ceiling and charged as the difference between the fee on the new figure and the fee already paid on the existing one. Stamp duty is charged by the state of the registered office — for a Goa company, under the Goa Stamp Act. Professional cost covers the drafting, certification and amendment work.
Because the slab rate reduces as capital rises, the marginal cost of a higher ceiling is lower than most people expect, which is the argument for setting it once against a two-year plan instead of raising it twice.
Does increasing authorized capital bring money into the company?
No. Not one rupee. It raises the ceiling and nothing else — no shareholder pays anything, no shareholding changes, and the balance sheet is unaffected.
Money enters the company at the next stage, when shares are issued and allotted within that ceiling through a rights issue, a private placement, a bonus issue or the conversion of a loan. That stage carries its own resolutions, its own valuation requirements and its own filings.
Can authorized capital be reduced later?
Cancelling unissued authorized capital is possible where the articles permit it, by a resolution and a filing with the Registrar. It is not the same as a reduction of capital.
A reduction of share capital — touching issued and paid-up capital, refunding shareholders or writing off lost capital — is a Section 66 process requiring a special resolution and confirmation by the Tribunal. It is a substantially longer and more expensive route, which is a further reason to set the ceiling sensibly rather than defensively high.
How long does the whole process take?
Where all members consent to shorter notice, seven to ten working days from instruction to filing is realistic. Where full twenty-one clear days' notice has to be given, the general meeting alone pushes it past three weeks.
Registrar approval of SH-7 usually follows within a few working days. If there is a closing date attached to an investment, the sequence should be started at least four weeks out.
Do we need to change the memorandum and articles as well?
Yes. The capital clause of the memorandum states the authorized capital, so it is altered by the resolution and has to be reprinted to match. Section 15 requires every copy issued after an alteration to carry it, with a penalty for each copy issued without.
The articles need altering only where they either lack the power to increase capital or state the capital figure themselves. Both situations are checked at the start, because they change what resolution is required.
Is the process different for an OPC or a small company?
The legal steps are the same — the power in the articles, a members' resolution, SH-7 within thirty days — but the mechanics and the fee scale differ.
In a one person company, the member's decision recorded and signed in the minutes book takes the place of a general meeting. Small companies and OPCs are also charged on a lower fee scale for several filings. The applicable scale is confirmed against the current fee rules at the time of filing.
Can we increase authorized capital and allot shares in the same week?
In practice, yes, provided the sequence is respected: the ceiling has to be raised before the allotment is made, not afterwards to regularise it.
The two exercises are usually planned as one. The general meeting can deal with the increase and with the special resolution for a private placement at the same sitting, with the offer letter, valuation report and the allotment timed to follow. Compressing it further than that is where mistakes get made.
Send the memorandum and the target figure.
The current MoA and AoA, the existing capital and the ceiling you want is enough. You will get the resolution position, the fee and duty computation and the timetable back the same day.