Increase in Authorised Share Capital: Resolution, SH-7 and Stamp Duty
Raise the share capital ceiling before an allotment, with the resolution, amended Memorandum, stamp duty and ROC forms handled together.
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Authorised share capital is the maximum capital a company may issue, as stated in its Memorandum of Association. When a founder allotment, investor round, ESOP pool or conversion of a convertible instrument would push issued shares beyond that ceiling, the company must raise the ceiling first. The usual route is a shareholder resolution, an amended capital clause, payment of state stamp duty and ROC fees, and filing of Form SH-7, with Form MGT-14 where a special resolution is also passed. Our team sequences these steps so the increase is in place before the board allots a single share, which is where most last-minute fundraising delays arise.
Who provides this service: our team of Company Secretaries and compliance specialists.
Who Needs Increase in Authorised Share Capital?
- Startups closing an equity round that would take issued shares above the current authorised capital
- Companies creating an ESOP pool that needs unissued share capital to draw on
- Businesses converting loans, convertible notes or debentures into shares
- Promoters planning bonus shares or a rights issue that needs additional headroom
- Companies that incorporated with a minimal capital and are now scaling operations
Key Benefits
- A check of the Articles of Association first, so the right resolution is passed the first time
- Notice and explanatory statement drafted for the general meeting, with quorum and voting handled correctly
- Amended capital clause of the Memorandum prepared to match the new authorised capital
- State stamp duty and ROC fee worked out before filing, so there is no surprise at payment
- Form SH-7 and, where needed, Form MGT-14 filed within the statutory window
- Sequencing advice so the increase is recorded before shares are allotted to investors or employees
How It Works
Plan the target capital
We review current authorised and paid-up capital, upcoming rounds and ESOP plans, then agree a figure and share classes. Over-sizing adds stamp duty and fees, while under-sizing forces another cycle at the next round.
Check the Articles of Association
We confirm that the Articles allow the increase. If they do not, the Articles must be altered by special resolution first, which adds an MGT-14 filing and should be planned into the timetable.
Convene the board and send notice
The board approves the proposal and calls a general meeting. We prepare the notice, explanatory statement and proxy form, and advise on shorter notice where members consent in the manner the law allows.
Hold the meeting and pass the resolution
We assist with conduct of the meeting, voting, minutes and the signed resolution, and record attendance so the proceedings can stand up to later investor or lender review.
Prepare the amended Memorandum and pay duty
We prepare the revised capital clause, calculate stamp duty under the law of the state where the registered office sits, and arrange payment of duty and ROC fee before the filing is made.
File SH-7 and update records
We file Form SH-7 with the altered Memorandum, add MGT-14 where a special resolution was passed, track approval on the MCA portal and update registers so the allotment can proceed.
Documents Required
- Certificate of incorporation, Memorandum and Articles of Association
- Statement of current authorised and paid-up share capital with share classes
- Latest list of members and capitalisation table
- Proposed new authorised capital, face value and classes of shares
- Board resolution approving the proposal and calling the general meeting
- Notice of the general meeting with explanatory statement and attendance record
- Draft resolution and minutes of the meeting once held
- Altered Memorandum of Association showing the new capital clause
- Digital signature and DIN details of the director signing the forms
- Proof of stamp duty payment for the state of the registered office
Timeline and Fees
Indicative timeline: Usually a few weeks end to end, driven by the notice period for the general meeting and then ROC processing of the filing. Timing depends on the meeting date, state stamp procedures and MCA portal processing.
Professional fee: The professional fee depends on the complexity of the Articles, whether they need alteration, the number of resolutions and the meeting support required. Stamp duty and ROC fees are government charges paid at actuals. Contact our team for a written quote.
What Can Go Wrong if This Is Missed or Done Incorrectly
- Allotting shares beyond the authorised capital is a breach of the Companies Act and can make the allotment liable to challenge
- Late filing of Form SH-7 attracts additional fees and can delay later filings that depend on the updated capital
- Short-paid stamp duty can attract penalty under the state stamp law and cause trouble in due diligence
- A mismatch between the Memorandum on record and the shares actually issued can stall investor closings and funding releases
Frequently Asked Questions
Should authorised capital be increased before or after allotting shares?
Before. A company cannot allot shares beyond its authorised capital, and an allotment made without headroom is open to challenge. Because investors usually want shares issued quickly after funds arrive, the increase should be completed ahead of the closing date, not alongside it.
Which resolution is needed to increase authorised capital?
Section 61 of the Companies Act 2013 allows the increase by an ordinary resolution if the Articles permit it. If the Articles do not authorise the increase, they must first be altered by special resolution. Our team reads the Articles at the start so the right sequence is followed.
Is stamp duty payable on an increase in authorised capital?
Yes, in most states, and the rate and method depend on the state where the registered office is located. A fee to the Registrar is also payable with Form SH-7 and depends on the amount of the increase. Check the state stamp schedule and the MCA fee table for current figures.
By when must Form SH-7 be filed?
The form is filed with the Registrar within 30 days of passing the resolution. Delay attracts additional fees, and an increase that is not recorded on the MCA portal can hold up the allotment, the filing of the allotment return and investor closing conditions.
Can shareholders approve the increase without holding a meeting?
The resolution is passed at a general meeting, either physical or through a permitted electronic mode. Notice is normally 21 clear days, but shorter notice is possible with the consent of the majority of members that Section 101 requires. Circulating a written resolution is not a substitute.
Do we need to wait for SH-7 approval before allotting shares?
Many practitioners prefer to wait until the filing shows as approved on the MCA portal, because the allotment return later refers to the updated capital and a mismatch can lead to questions. Where a closing date is tight, we plan the sequence in advance with the legal advisers on both sides.
Official Sources
Rules, forms and fees change. Check the current position on the official portal:
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Last reviewed: . Laws, fees and procedures change; check the official portal before you act.
Disclaimer: The information on this page is for general informational purposes only and does not constitute professional legal, tax or compliance advice. Requirements vary by situation. Please consult a qualified CA or CS for advice specific to your needs. Government fees and timelines are subject to change; verify with the relevant authority before proceeding.