what is increasing authorized Capital?
This is an activity in which the capital of a company (sometimes referred to as share capital) is raised by issuing new shares or by increasing the nominal value of the existing shares. To do this, it is important to provide resources or other capital or to transform reserves or earnings that were already part of the company’s equity. The capital is raised but is not considered fresh in this second instance.
The stockholders must authorize this form of operation. A certain proportion of the overall value of the new stocks obtained must be charged up front when capital is raised.
There are some options for a rise in capital:
Verifying the Company's AOA
To ensure the enabling provision in the Articles of Association (AOA) particularly regarding increased authorized share capital, verify AOA before beginning the procedures for increasing the authorized share capital. If the authorized share capital is not increased, the company must first amend the company under the AOA.
Hold Board Meetings
Convene the Board of Directors by sending a notice to the director to increase the authorized share capital. Get the Board approval for an increase in the authorized share capital of the Board of Directors at the Board meeting. Then set a date, time, and place to hold an extraordinary general assembly to obtain the shareholders' approval of the increased authorized share capital, and to make changes to the company's MOA.
Additional General Meeting
Hold the Extra-Ordinary General Meeting and request permission by shareholders to raise approved capital at a time, date, and location stated at the Notice of Extra-Ordinary General Meeting. An ordinary resolution shall allow for the shareholders' permission to raise the approved share capital.
Filing ROC Froms
Since the ordinary resolution at the Extra-Ordinary General Assembly has been passed, the organization shall apply Form SH-7, in 30 days after the ordinary resolution has been passed. In accordance with Form SH-7 it is appropriate to pay the specified fee for approved capital and to append the following documents:
- EGM Notice
- Authorized Ordinary resolution copy, Real copy.
- The Partnership Memorandum was amended.
If, as specified in the Companies Act and Company Law, the authorized capital increase procedures are followed, the registrar will give approval to the company filing and increase the permitted share capital of the company.
*It is necessary to take into account subscription rights in every capital increase. In other terms it would be sold to purchase more shares (sometimes at a discount, advantageous or preferred price) before those who previously did not own any stock in the company. This means that the new shareholder is to be preferential subscribers.*
