What is the procedure to increase the authorised share capital of a company?

Increasing the authorised share capital can be done at any time, provided the company follows the requirements of Section 61 (read with Sections 13 and 14) of the Companies Act, 2013. The process involves the following steps:

1. Check Articles of Association (AOA)

Before increasing the authorised capital, the company must ensure that the Articles of Association permit such an increase. If the AOA does not allow it, the Articles must be amended by passing a special resolution as per Section 14 of the Companies Act, 2013.

2. Hold a Board Meeting

A Board Meeting is convened to approve the proposal and to call an Extraordinary General Meeting (EGM) for shareholders to vote on the increase in authorised share capital.

3. Conduct the EGM

On the scheduled date, the EGM is held, and an Ordinary Resolution is passed under Section 61(1)(a) to approve the increase in authorised share capital.

4. File Form SH-7

After the resolution is passed, the company must file Form SH-7 with the Registrar of Companies (ROC) within 30 days, along with the prescribed documents and fees.

What happens if a company does not file the form for increasing authorised share capital?

If a company fails to file the required resolution or agreement for the increase in authorised share capital within the prescribed time (including the extended period allowed under Section 403), it will face penalties under Section 117(2) of the Companies Act, 2013.

The consequences are:

• The company may be fined a minimum of ₹5,00,000, which can extend up to ₹25,00,000.
• Every officer in default may be fined a minimum of ₹1,00,000, which can extend up to ₹5,00,000.

Therefore, timely filing of the form is crucial to avoid heavy penalties.