- May 15, 2022
- Posted by: Accounting Equation
- Category: General Topics
Funds are needed to keep the business running, but they can be taken from loans and advances or raised by increasing company authorized capital. Changes to a private limited company structure must follow the rules set out by the Company Act.
When creating a Limited Company, the paid-up capital is established from the Memorandum of Association. The company can then issue new shares within the limits of their paid-up capital, but if more are needed than are specified in their MOA, amendments must be made.
As both the authorized share capital and the paid-up capital relate to capital, there is an overlap between them. The authorized share capital refers to the total value of shares a company can issue, whereas the paid-up capital relates to how many shares are currently issued.
Increasing the authorized capital is a necessary step in order to infuse more funds into the company. Increasing the paid-up share capital is necessary for an expansion of one’s business. One will need to follow the steps outlined in this article to do so.
If you wish to increase the number of shareholders, you can do so by increasing the amount in the paid-up share capital. However, the total paid-up share capital cannot exceed the authorized capital and must be less than 100%.
Procedure to increase the authorised Share capital:
- Ensure that the Articles of Association of the Company have a provision for increasing the entity’s authorized share capital prior to commencing procedures for doing so. If not, First make changes in the Article of Association of the Company.
- A board meeting must be convened if you wish to increase the authorized share capital of the company. The Board of Directors will need to approve this decision in a Board Meeting.
- Call and conduct an Extra-ordinary General meeting to obtain the approval of the shareholders for increasing the authorized share capital and make necessary changes to the MOA of the Company.
- Form SH7 needs to be filed within 30 days of the Extraordinary General Meeting, and the following specific documents must be attached.
- Amended Memorandum of Association
- True copy of resolution passed in EGM
- Notice of EGM