A company may have a profitable business, willing investors and sufficient demand for new shares—but if its authorised share capital is too low, the company may first need to increase that limit before making the proposed allotment.
Authorised share capital is the maximum share capital that a company is authorised to issue under its Memorandum of Association.
When a company wants to issue additional shares beyond its existing authorised capital, it may need to increase its authorised share capital before proceeding with the allotment.
Under Section 61 of the Companies Act, 2013, a limited company having share capital may, if authorised by its Articles of Association, alter its share capital in a general meeting, including by increasing its authorised share capital. Section 64 then requires the company to notify the Registrar of the alteration in the prescribed manner.
For companies in Delhi, Noida, Gurugram, Ghaziabad, Faridabad and across India, this is a common ROC compliance requirement when a business is preparing for a new investment, rights issue, private placement or other issue of shares.
What Is Authorised Share Capital?
Authorised share capital is the maximum amount of share capital that a company is authorised to issue as specified in its Memorandum.
For example, suppose a company's capital structure is:
Authorised share capital: ₹10 lakh
Face value per share: ₹10
The company is therefore authorised to issue up to:
1,00,000 shares
This does not mean that the company has already issued 1,00,000 shares.
It only establishes the maximum capital that can be issued under the existing authorised capital.
Authorised Capital vs Issued Capital
These two concepts should not be confused.
Authorised Share Capital
The maximum share capital the company is authorised to issue.
Issued Share Capital
The portion of authorised capital that the company has actually issued to shareholders.
Subscribed Share Capital
The portion of issued capital that shareholders have agreed to subscribe.
Paid-Up Share Capital
The amount actually credited as paid-up on the shares.
For example:
Authorised capital: ₹50 lakh
Issued capital: ₹20 lakh
Subscribed capital: ₹20 lakh
Paid-up capital: ₹18 lakh
In this example, the company still has authorised capital available for additional issue, subject to the applicable legal and corporate requirements.
Why Does a Company Need to Increase Authorised Capital?
A company may need to increase authorised capital when its proposed share issue would exceed the existing authorised limit.
Common situations include:
-
New investor investment
-
Rights issue
-
Private placement
-
Preferential issue
-
Conversion of securities into shares
-
Business expansion
-
Founder restructuring
-
Employee share plans where applicable
-
Merger or restructuring
-
Increasing the company's capital base
The company should check its authorised capital before completing the allotment process.
Example: Delhi Startup Raising Investment
Suppose a Delhi startup currently has:
Authorised capital: ₹10 lakh
Issued and subscribed capital: ₹10 lakh
The company is now negotiating an investment that requires issuing:
2,00,000 new shares at ₹10 face value
The face-value component alone is:
₹20 lakh
The existing authorised capital of ₹10 lakh would not be sufficient for the proposed issue.
The company may therefore need to increase its authorised share capital before proceeding with the relevant allotment.
What Is Section 61?
Section 61 of the Companies Act, 2013 gives a limited company having share capital the power to alter its share capital if its Articles authorise it to do so.
One of the specific powers listed in Section 61 is:
Increasing authorised share capital by such amount as the company considers expedient.
The alteration is made through the prescribed corporate process.
Therefore, a company cannot simply change the authorised capital figure in its accounting software or internal records.
The company's constitutional documents and MCA records must also be updated through the applicable process.
What Is Section 64?
Section 64 deals with notice to the Registrar regarding alteration of share capital.
The MCA's current SH-7 Instruction Kit states that where a company alters its share capital in a manner covered by Section 61, the company must file the prescribed notice with the Registrar within 30 days of the alteration, along with the altered Memorandum where applicable.
This is why SH-7 is an important part of an authorised-capital increase.
What Is SH-7?
SH-7 is the MCA form used for reporting specified alterations in share capital.
The current MCA Instruction Kit identifies SH-7 as the webform for notice to the Registrar of alteration of share capital.
It is filed under:
Section 64(1) of the Companies Act, 2013
read with:
Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014.
For an increase in authorised share capital, SH-7 is therefore a key ROC filing.
Is SH-7 the Same as MGT-14?
No.
The two forms perform different functions.
MGT-14
Used for filing applicable resolutions and agreements with the Registrar.
SH-7
Used for notifying the Registrar about specified alterations in share capital.
In an authorised-capital increase, MGT-14 may be required before SH-7, depending on the resolution and applicable provisions.
The current MCA SH-7 Instruction Kit specifically contains a check for the relevant MGT-14 SRN and states that, where provided, the purpose selected in MGT-14 should be "Alteration in authorized share capital."
Therefore, the filing sequence should be planned rather than treating SH-7 as an isolated form.
Does the Articles of Association Need to Authorise the Increase?
Yes, Section 61 is important here.
The section permits a limited company having share capital to alter its share capital if authorised by its Articles of Association.
Therefore, before beginning the process, the company should check its Articles.
If the Articles do not contain the required authority, the company may need to first alter them through the appropriate corporate process.
Can the Company Increase Authorised Capital Without a Shareholder Resolution?
The increase under Section 61 is an alteration undertaken by the company in its general meeting.
Therefore, the company should follow the applicable shareholder-resolution process.
The exact type of resolution and notice requirements should be determined based on the company's Articles and the applicable provisions.
The company should not simply pass an internal management note and change the authorised-capital figure.
Ordinary Resolution or Special Resolution?
For an ordinary increase in authorised share capital under Section 61, the company generally proceeds through a resolution in general meeting as permitted by the Act and Articles.
The exact resolution requirement should be checked against the company's constitutional documents and the transaction.
This is important because a company may simultaneously need a special resolution for another aspect of the proposed share issue, even where the authorised-capital increase itself is dealt with separately.
Example: Noida Private Limited Company
A Noida company has:
Authorised capital: ₹5 lakh
Issued capital: ₹5 lakh
The company plans to raise funds from an investor and issue additional shares.
The proposed issue requires an authorised capital of:
₹25 lakh
The company may therefore need to:
-
Check its Articles
-
Convene the required general meeting
-
Pass the appropriate resolution
-
File MGT-14 where applicable
-
File SH-7
-
Update the MOA
-
Pay applicable MCA fees
-
Complete the share allotment process separately
The increase in authorised capital itself does not mean that the new shares have already been issued.
Increasing Authorised Capital Does Not Automatically Issue Shares
This is one of the most important distinctions.
Suppose:
Existing authorised capital: ₹10 lakh
The company increases it to:
₹50 lakh
The company has simply increased its legal capacity to issue shares.
It has not automatically issued another ₹40 lakh of shares.
If the company later issues new shares, a separate allotment process must be followed.
Depending on the nature of the issue, additional compliance may include:
-
PAS-3
-
MGT-14
-
PAS-4/PAS-5
-
Valuation documentation
-
Board/shareholder approvals
-
Other applicable forms
SH-7 vs PAS-3
These forms are often confused.
SH-7
Reports the alteration of authorised share capital.
PAS-3
Reports the return of allotment after applicable shares are actually allotted.
Example:
A company increases authorised capital from:
₹10 lakh → ₹50 lakh
SH-7 reports that increase.
Later, the company allots:
₹20 lakh worth of shares
The allotment may require PAS-3.
Therefore:
Increase in authorised capital ≠ allotment of shares
Practical Example: Investment Round
A Gurugram company has:
Authorised capital: ₹20 lakh
Existing issued capital: ₹18 lakh
It plans to issue:
₹10 lakh face value of new equity shares
The company does not have enough authorised capital for the proposed issue.
It may first increase authorised capital to an appropriate level.
After completing the authorised-capital increase, it can proceed with the applicable share-issue and allotment compliance.
How Much Should the Company Increase Authorised Capital By?
There is no universal amount that every company should choose.
The appropriate level depends on the company's:
-
Existing capital
-
Proposed issue
-
Funding plan
-
Shareholding structure
-
Future fundraising requirements
-
Business plans
-
Costs associated with authorised capital
The company should avoid increasing the authorised capital without a commercial reason.
At the same time, if a fundraising round is planned, management may consider the expected capital requirement before finalising the revised authorised capital.
Authorised Capital and Government Fees
Increasing authorised share capital generally results in additional statutory filing/stamp-fee implications, depending on the applicable fee structure and jurisdiction.
The cost should therefore be considered before passing the resolution.
The company should calculate the applicable MCA fee and any relevant state stamp duty based on:
-
Existing authorised capital
-
Revised authorised capital
-
State
-
Company type
-
Current MCA fee rules
Because fee structures can change, the company should verify the applicable fee at the time of filing.
Documents Required for Increasing Authorised Capital
A typical compliance file may contain:
-
Existing MOA
-
Existing AOA
-
Board resolution
-
General meeting notice
-
Explanatory statement where applicable
-
Shareholder resolution
-
Updated capital clause of MOA
-
MGT-14 acknowledgement where applicable
-
SH-7
-
Fee/challan
-
Updated MCA records
The exact documentation can vary based on the company and transaction.
Altered Memorandum of Association
The authorised capital is reflected in the company's constitutional documents.
Therefore, when authorised capital is increased, the relevant capital clause of the Memorandum of Association needs to be updated.
The current MCA SH-7 Instruction Kit expressly refers to filing the notice along with an altered memorandum where required.
For example:
Before
"The authorised share capital of the company is ₹10,00,000 divided into 1,00,000 equity shares of ₹10 each."
After
"The authorised share capital of the company is ₹50,00,000 divided into 5,00,000 equity shares of ₹10 each."
The exact wording should be consistent with the company's approved constitutional documents.
Example: Capital Clause Update
Suppose a company increases authorised capital from:
₹10 lakh
to:
₹1 crore
with a face value of:
₹10 per share
The capital clause must correspond to:
10,00,000 equity shares × ₹10 = ₹1 crore
The company should carefully check the mathematical consistency of:
-
Number of shares
-
Face value
-
Total authorised capital
before filing SH-7.
SH-7 Filing Deadline
The current MCA Instruction Kit states that the notice must be filed within:
30 days of the alteration or increase.
This means the company should not treat the MCA filing as an open-ended administrative task after passing the shareholder resolution.
The compliance calendar should record:
Resolution date → SH-7 deadline
Example of SH-7 Deadline
Suppose the authorised capital is increased through the relevant corporate action on:
10 September
The company should calculate the applicable 30-day filing period from the date of the alteration/increase.
The company should ideally prepare the filing immediately after the resolution rather than waiting until the final days.
What Happens If SH-7 Is Filed Late?
Delay in filing can lead to additional statutory fees and other compliance consequences under the applicable provisions.
The company should therefore monitor the 30-day period carefully.
A late filing can also complicate subsequent share allotment planning, particularly where the company needs the revised authorised capital before issuing new shares.
Why Timing Matters During Fundraising
Suppose a startup has received an investor commitment and plans to complete an allotment on:
30 June
But its authorised capital is insufficient.
If management waits until the last moment to increase authorised capital, the investment timeline may be affected.
A better approach is:
Investment planning → authorised capital review → shareholder approval → MGT-14 where applicable → SH-7 → revised authorised capital → allotment → PAS-3
This gives the company a clearer compliance sequence.
Can a Company Allot Shares Before Increasing Authorised Capital?
If the proposed allotment would exceed the company's authorised capital, the company should first ensure that its authorised capital has been appropriately increased.
A company should not simply allot shares beyond the authorised limit and attempt to correct the capital structure later.
The authorised-capital review should happen before the allotment.
Example: Private Placement
A company has:
Authorised capital: ₹10 lakh
Existing issued capital: ₹9 lakh
It proposes a private placement requiring:
₹15 lakh face value of new shares
The proposed issue would exceed the existing authorised capital.
The company should first consider increasing the authorised capital to an adequate level and completing the relevant ROC compliance before completing the allotment.
Private-placement compliance would remain separately applicable.
Increase in Authorised Capital and Share Premium
Suppose a company issues shares at:
Face value: ₹10
Issue price: ₹100
The authorised capital relates to the face-value share capital, not the entire issue price including securities premium.
For example:
1,00,000 shares × ₹10 face value = ₹10 lakh share capital
If issued at ₹100 per share:
Total issue proceeds = ₹1 crore
The difference includes securities premium.
This distinction is important when determining whether the existing authorised share capital is sufficient.
Example: Investor Pays ₹1 Crore
Suppose a company issues:
1,00,000 shares
at:
₹100 per share
Face value:
₹10
Premium:
₹90
The share-capital component is:
₹10 lakh
while the total money raised is:
₹1 crore
Therefore, authorised capital is generally assessed based on the face-value capital represented by the shares, not simply the total amount raised from the investor.
Increase in Authorised Capital Before Rights Issue
A company may also need to increase authorised capital before a rights issue if the proposed issue would exceed the existing authorised limit.
The company should therefore review:
-
Existing authorised capital
-
Existing issued capital
-
Proposed rights issue
-
Face value of shares
-
Available authorised capacity
before finalising the rights issue documentation.
Increase in Authorised Capital Before Bonus Issue
Bonus issues can also require careful capital planning.
A company proposing a bonus issue should examine whether the resulting issued capital will remain within the authorised capital.
If not, the authorised capital may need to be increased before implementing the bonus issue.
The company should also consider the separate requirements under Section 63 and applicable rules.
Increase in Authorised Capital and MOA
The Memorandum contains the company's capital clause.
Therefore, when the authorised capital changes, the corresponding constitutional record must be updated.
This is why SH-7 is more than an accounting entry.
The company is formally altering a component of its constitutional structure.
What Is the Role of the Board?
The Board generally initiates the process and approves the proposal to increase authorised capital and convene the necessary general meeting.
The Board may consider:
-
Proposed increase
-
Business requirement
-
Proposed share issue
-
Capital structure
-
General meeting date
-
Notice and explanatory statement
-
Professional advice
-
Filing timeline
The exact resolution wording should be prepared according to the company's circumstances.
Role of Shareholders
Where Section 61 applies, the alteration is made by the company in general meeting.
Shareholders therefore play an important role in approving the proposed increase.
The company should follow the applicable:
-
Notice requirements
-
Voting requirements
-
Meeting procedure
-
Resolution requirements
-
Minutes requirements
The approved resolution becomes an important supporting record for the MCA filing.
Role of Company Secretary or Professional
The compliance professional may assist with:
-
Reviewing AOA
-
Drafting resolutions
-
Preparing meeting documentation
-
Checking capital calculations
-
Preparing MGT-14
-
Preparing SH-7
-
Reviewing altered MOA
-
MCA filing
-
Post-filing records
Professional review is particularly useful where the capital increase is connected with a larger fundraising transaction.
MCA Technical Checks for SH-7
The current MCA SH-7 Instruction Kit contains several technical checks.
Among other things, it requires attention to:
-
Valid CIN
-
Approved company status
-
Valid signatory details
-
Valid DSC
-
Relevant MGT-14 SRN where applicable
-
Correct MGT-14 purpose
-
No other pending SH-7 against the CIN
-
Applicable INC-28 details
-
Other company-specific validations.
This means a company should not prepare SH-7 in isolation.
The MCA master data and preceding filings should be checked first.
SH-7 and MGT-14 SRN
Where MGT-14 is applicable, the current MCA instruction kit requires the relevant approved MGT-14 SRN to be provided.
It also states that the purpose selected in MGT-14 should be:
"Alteration in authorized share capital."
This makes sequencing particularly important.
A company should ensure that the MGT-14 filing is properly completed before relying on its SRN in SH-7.
Common Mistake: Confusing Authorised Capital With Paid-Up Capital
A company may say:
"Our paid-up capital is ₹10 lakh, so our authorised capital is ₹10 lakh."
That is not necessarily true.
A company could have:
Authorised: ₹50 lakh
Paid-up: ₹10 lakh
The company already has ₹40 lakh of authorised capacity that may be available for future issue, subject to applicable law.
Before increasing authorised capital, management should check the actual capital structure.
Common Mistake: Increasing Capital Without Checking the AOA
Section 61 requires the company to be authorised by its Articles for the alteration.
Therefore, management should review the AOA before proceeding.
If the Articles do not support the required action, the company may need to address that issue first.
Common Mistake: Filing SH-7 Without Updating the MOA
The capital clause in the MOA should correspond with the revised authorised capital.
The current MCA instruction framework specifically contemplates filing the altered Memorandum where applicable.
The company should therefore ensure consistency between:
-
Resolution
-
MOA
-
SH-7
-
MCA master data
Common Mistake: Assuming SH-7 Completes the Share Issue
SH-7 only addresses the alteration in share capital covered by the form.
If the company subsequently issues shares, additional compliance can apply.
For example:
Authorised capital increase → SH-7
followed by:
Actual allotment → PAS-3
The company should identify every stage of the transaction separately.
Common Mistake: Incorrect Capital Calculation
Suppose the company states:
5,00,000 shares × ₹10 = ₹50 lakh
but the form says:
₹5 crore
This type of mismatch can create unnecessary filing problems.
The compliance team should calculate:
Number of authorised shares × face value = authorised share capital
before submission.
Common Mistake: Ignoring Securities Premium
When fundraising occurs at a premium, management may look at the total investment amount rather than the face-value component.
For authorised-capital purposes, the share-capital component should be distinguished from securities premium.
This is particularly important for startup fundraising.
Common Mistake: Increasing Capital Too Late
A company may have an investor ready to invest but discover that its authorised capital is insufficient immediately before allotment.
This can delay:
-
Investment closing
-
Share allotment
-
PAS-3
-
Cap-table update
-
Investor documentation
A capital-structure review should therefore happen early in every fundraising exercise.
Practical Authorised Capital Increase Workflow
A company can follow this sequence:
Step 1: Review Existing Capital
Check:
-
Authorised capital
-
Issued capital
-
Subscribed capital
-
Paid-up capital
Step 2: Determine Additional Requirement
Calculate the face-value capital needed for the proposed issue.
Step 3: Check the AOA
Confirm that the Articles authorise the alteration.
Step 4: Board Meeting
Approve the proposal and initiate the shareholder process.
Step 5: General Meeting
Pass the required resolution.
Step 6: Prepare Updated MOA
Revise the capital clause to reflect the increased authorised capital.
Step 7: File MGT-14 Where Applicable
Complete the applicable resolution filing.
Step 8: File SH-7
Submit the notice of alteration within the prescribed timeline.
Step 9: Update Corporate Records
Maintain:
-
Updated MOA
-
Resolutions
-
MCA approval
-
Capital register
Step 10: Proceed With Share Issue
If the increase was required for a proposed allotment, complete the separate issue/allotment compliances.
Practical Example: Delhi Company Increasing Capital From ₹10 Lakh to ₹50 Lakh
A Delhi private limited company has:
Existing authorised capital: ₹10 lakh
Existing paid-up capital: ₹8 lakh
The founders expect an investment requiring additional authorised capacity.
The company decides to increase authorised capital to:
₹50 lakh
The practical process can involve:
-
Board approval
-
General meeting
-
Shareholder resolution
-
Altered MOA
-
MGT-14 where applicable
-
SH-7
-
MCA fee
-
Updated company records
After the increase, the company may have sufficient authorised capacity for the proposed issue, subject to the separate allotment requirements.
Practical Example: Noida Company Raising ₹2 Crore
A Noida company plans to raise:
₹2 crore
by issuing shares at:
₹100 per share
with:
₹10 face value
The number of shares proposed:
2,00,000
Face-value capital:
₹20 lakh
Therefore, the authorised capital needs to accommodate the ₹20 lakh share-capital component, not the entire ₹2 crore investment amount.
This is a practical distinction that can prevent unnecessary overstatement of the authorised-capital requirement.
Practical Example: Gurugram Company With Existing Authorised Capacity
A Gurugram company has:
Authorised capital: ₹1 crore
Issued capital: ₹60 lakh
It plans to issue shares with:
₹20 lakh face value
The proposed issue remains within the existing authorised limit.
The company may therefore not need to increase authorised capital merely because it is raising ₹2 crore at a premium.
The finance team should first calculate the face-value component before initiating an authorised-capital increase.
Authorised Capital and Stamp Duty
The cost of increasing authorised capital can depend partly on the applicable state stamp-duty framework.
A company operating in Delhi may have different applicable costs from a company operating in another State.
Therefore, businesses should not rely on an old fee calculation from another company or an older transaction.
The applicable MCA fee and state-level charges should be checked at the time of filing.
What Records Should Be Preserved?
After completing the authorised-capital increase, the company should preserve:
-
Board minutes
-
General meeting notice
-
Explanatory statement
-
Shareholder resolution
-
Attendance/meeting records
-
Updated MOA
-
MGT-14 acknowledgement where applicable
-
SH-7 acknowledgement
-
MCA approval
-
Fee/challan
-
Updated capital register
-
Updated cap table
These documents can later be useful for:
-
Audit
-
Fundraising
-
Due diligence
-
Share transfers
-
Corporate restructuring
-
Investor reporting
Authorised Capital and Due Diligence
During investor or buyer due diligence, the company's capital structure may be reviewed carefully.
Potential questions can include:
-
What is the authorised capital?
-
What is the issued capital?
-
How much authorised capacity remains?
-
Were previous increases properly filed?
-
Does the MOA match MCA records?
-
Were allotments properly reported?
-
Are shareholder records consistent?
Maintaining proper SH-7 records makes these questions easier to answer.
Authorised Capital Compliance Checklist
Before filing an increase, check:
-
Current authorised capital
-
Current issued capital
-
Current subscribed capital
-
Current paid-up capital
-
Proposed issue size
-
Face value of proposed shares
-
Available authorised capacity
-
Articles of Association
-
Board approval
-
General meeting approval
-
Resolution type
-
Updated MOA
-
MGT-14 applicability
-
MGT-14 SRN where applicable
-
SH-7 preparation
-
MCA filing fee
-
State stamp duty, where applicable
-
30-day filing timeline
-
DSC validity
-
Professional certification
-
MCA acknowledgement
-
Updated statutory records
Final Takeaway
Increasing authorised share capital is a formal corporate action—not simply an accounting adjustment.
Under Section 61, a limited company having share capital may, if authorised by its Articles, alter its share capital in a general meeting, including increasing its authorised share capital.
Once the alteration takes place, Section 64 and Rule 15 require the prescribed notice to be filed with the Registrar. The current MCA SH-7 Instruction Kit states that the filing is generally required within 30 days of the alteration or increase, along with the altered Memorandum where applicable.
The practical sequence is:
Check existing capital → calculate requirement → check AOA → Board approval → general meeting → alter MOA → MGT-14 where applicable → SH-7 → update records → proceed with allotment separately.
For companies in Delhi, Noida, Gurugram, Ghaziabad, Faridabad and across India, reviewing authorised capital before a fundraising or share-issue transaction can prevent delays and help keep the company's MCA records, MOA and cap table aligned.
Need Help With Authorised Capital Increase?
If your company needs assistance with authorised share capital increase, SH-7 filing, MGT-14, MOA alteration or broader ROC/MCA compliance, FilingSuvidha can help coordinate the applicable process.
Website: FilingSuvidha
Phone: +91-9625995981
Email: info@filingsuvidha.com
Our focus is on transparent pricing and on-time delivery.
Disclaimer
This article is intended for general informational purposes only and should not be treated as legal, company-secretarial, accounting or professional advice. The procedure, resolutions, fees, stamp duty and filing requirements can depend on the company's structure, Articles, proposed transaction and provisions applicable at the time of filing. Companies should verify the latest MCA forms, rules, notifications and statutory requirements before proceeding.