Why this often gets set "for future use," at a real cost
Authorised capital and paid-up capital are different figures — authorised is the ceiling; paid-up is what's actually been issued and paid for. A company can have significant headroom between the two, and only needs to increase authorised capital once it wants to issue shares beyond the existing ceiling. Because the ROC fee and stamp duty on an increase are both based on the increased amount, setting authorised capital far higher than actually needed "to have room later" has an immediate cost with no corresponding immediate benefit — a consideration worth weighing at incorporation as much as at any later increase.
The articles of association need to permit an increase in authorised capital — most standard articles do, but this is worth confirming before assuming the increase can proceed with only an ordinary resolution.
Documents required
- The company's current Memorandum of Association, showing the existing authorised capital clause.
- Notice of the general meeting at which the resolution will be passed.
- The resolution itself, once passed, along with the explanatory statement.
- An altered Memorandum of Association reflecting the new authorised capital.
The process, step by step
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Confirming the articles permit the increase
The articles of association are checked to confirm they authorise an increase in share capital — if not, they need amending first, adding a step to the process.
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Board approval to convene a general meeting
The board approves calling a general meeting to consider the resolution, and notice is issued to shareholders.
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Passing the resolution
Shareholders pass the resolution (ordinary, unless the articles specify otherwise) approving the increased authorised capital.
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Filing Form SH-7
The resolution is filed with the Registrar within 30 days, along with the altered Memorandum reflecting the new capital clause, and the applicable fee and stamp duty are paid.
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Confirmation
Once processed, the company's Master Data on the MCA portal reflects the new authorised capital, and the company can proceed to allot shares within the new ceiling.
Practical notes from our engagements
- Authorised capital increased well beyond what's actually planned. Since the fee and stamp duty scale with the increase, setting a ceiling far beyond any concrete near-term plan means paying for headroom that may not be used for years, if at all.
- The increase filed after the allotment it was meant to support. Authorised capital needs to be increased before an allotment that would exceed the existing ceiling — sequencing this after the fact isn't possible; the increase has to come first.
- Articles not checked before assuming an ordinary resolution suffices. Some companies' articles specify a higher approval threshold for this kind of change — checking this before calling the meeting avoids having to redo the resolution.
How we handle authorised capital increases
We confirm the articles permit the increase before scheduling anything, and work with the client to size the increase against an actual near-term plan rather than an arbitrary round number, given that the cost scales with the amount. The SH-7 filing and the altered Memorandum are prepared together so there's no gap between the resolution being passed and the company's records reflecting it.
Related services
Frequently asked questions
What's the difference between authorised and paid-up capital?
Authorised capital is the maximum the company may issue under its Memorandum. Paid-up capital is what has actually been issued and paid for by shareholders — a company can have significant headroom between the two.
Do we need to increase authorised capital every time we issue new shares?
Only if the new issue would take total issued shares beyond the current authorised ceiling. An allotment within the existing headroom doesn't require an increase first.
What approval is needed to increase authorised capital?
Generally an ordinary resolution passed by shareholders, unless the company's own articles specify a higher threshold like a special resolution.
Is there a cost to increasing authorised capital?
Yes — both an ROC fee, based on the increased capital slab, and stamp duty apply, unlike some purely procedural company filings that carry only a nominal fee.
Should we set authorised capital much higher than we currently need, to avoid doing this again later?
This is a trade-off — a higher ceiling avoids a future filing, but the cost of the increase scales with the amount, so setting it far beyond any concrete plan means paying now for headroom that may go unused for years.
Can the increase be filed after we've already issued shares beyond the old ceiling?
No — the increase needs to be completed before an allotment that would exceed the existing authorised capital; it can't be done retroactively to validate shares already issued.