Increase in the authorized capital under Companies Act, 1956: The provisions regarding increase of share capital are found in section 94(1) r/w Section 16, 31 and section 97 of the Companies Act, 1956.
Section 94 (1) of the act states that a limited company having a share capital, if so authorized by its articles , alter the conditions of its memorandum to increase its share capital by such amount as it thinks expedient by issuing new shares.
Furthermore section 31 of the act states that the articles of company can be altered by a special resolution if so allowed by the memorandum of the company and section 16(3) states that the memorandum of articles can be altered by the same procedure as provided for altering of articles if the procedure for same is not provided in the section.
In addition to this section 97 states that when the capital is increased a notice of the same has to be given to the registrar within 30 days of passing of the resolution (Form 5).
Procedure:
Meetings to be held:
- A board meeting is to be convened to discuss the agenda and fix general meeting date for passing special resolution of shareholders.
- Convene general meeting and pass Special resolution for alteration of MOA or AOA and increase of share capital.
Alteration in MOA and AOA:
If the Memorandum of Association (MOA) and the Articles of Association (AOA) contain a clause regarding the share capital they have to altered by filing E-Form 23 with an explanatory statement within 30 days of passing the resolution. (Section 192- Registration of Resolution)
Forms to be filed with Ministry of Corporate Affairs:
Form 5 has to be filed with ROC (Registrar of Companies) within 30 days and accordingly the Registrar of Companies will make necessary changes in the Company’s Memorandum & Articles of Association. (Section 97)
Increase in authorized capital under the Companies Act, 2013: The increase in authorized capital under companies Act, 2013 has been dealt under section 61 and section 64 R/W sections 13 and section 14
Section 13 and section 14 are regarding alteration of memorandum and articles by passing a special resolution. Section 61 states that a limited company having its share capital may if so authorized by its articles alter its memorandum in its general meeting to increase its authorized share capital by such amount as it thinks expedient. Section 64 states that when the authorized capital is increased the notice of the same should be given to the registrar in 30 days of such alteration or increase.
Changes: All the requirements are same except the following:
Notice to the registrar: According to the old act the notice to the registrar should be within 30 days after passing of the resolution whereas under the Companies Act the notice to the registrar has to be given in 30 days after such alteration or increase.
Penalty for not reporting to the Registrar : The penalty under the old act for not reporting about the change of capital to the registrar was Rs. 500 per day till the default continues but under the Companies Act, 2013 the penalty shall not be less than Rs. 1000 per day till default continues or Rs. 5,00,000 whichever is less .