A company may need to expand its approved share capital before giving new equity shares and increasing paid-up capital. Approved share capital is the all out estimation of shares a company can issue, while paid-up capital is the all out estimation of shares the company has given. Paid-up capital can never surpass approved capital. Consequently, if a company having an approved capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs might want to enlist new shareholders, it can do so either by:
Increasing authorised share capital and issuing new shares. (or on the other hand)
Transferring shares from existing shareholders to the new shareholders.
Procedure to Increase Authorised Share Capital
Step 1 – Verifying approval within the Articles of Association
Step 2 – Board meeting to notify the incidence of EGM- Issue notices in writing at least 21 days before the date of the meeting for the General Meeting with Explanatory Statement as required under Section 102 of the Companies Act 2013.
Step 3 – Extraordinary General Meeting- Hold the general meeting and pass the necessary resolution with required majority. List of Resolution for which MGT-14 requires to be filed, File the Form MGT-14 within 30 days for the Special Resolution passed at the General Meeting, File the Form SH-7 with the annexures (Copy of the resolution for alteration of capital, Altered memorandum of association, Notice of EGM Explanatory Statement etc) and make the payment for the stamp duties online.
Step 4 – ROC Form documenting- With the approval received from RoC for the Form SH-7 filed with MCA, the changed status of authorised capital of the Company can be checked at MCA site.