Increase Authorized Capital

AUTHORISED CAPITAL:- THIS IS THAT PART OF CAPITAL WHICH HELPS TO  DETERMINE THE MAXIMUM AMOUNT OF SHARES A COMPANY CAN ISSUE AT THE TIME OF INCORPORATION OR EVEN LATER . CAN THE AUTHORISED CAPITAL CAN BE ALTERED BY WAY OF INCREASING OR DECREASING THIS CAPITAL .

TO ISSUE ADDITIONAL SHARES OR RAISE FUNDS, AUTHORISED CAPITAL MUST BE INCREASED.

SO WHENEVER A COMPANY WANT ADDITIONAL FUNDS FOR BUSINESS OR ISSUE ADDITIONAL SHARES THEY CAN INCREASE THEIR AUTHORISED CAPITAL FOR THIS PURPOSE BY WAY OF BONUS ISSUE OR RIGHT ISSUE.

INCREASE IN AUTHORIZED CAPITAL IS ONE OF THE MOST IMPORTANT EVENT HELD IN  COMPANY BECAUSE IT INCREASES THE UPPER CAPACITY OF COMPANY TO RAISE FURTHER CAPITAL THROUGH NEW SHARES.

WHEN  ANY TWO OR MORE PERSON START THEIR COMPANY FIRST TIME THEY HAVE TO  START THEIR START-UP JOURNEY WITH AN MINIMUM AMOUNT OF RUPEES 1,00,000 AS AN AUTHORIZED CAPITAL. BECAUSE THIS IS MANDATORY REQUIREMENT  OF COMPANIES ACT TO START THE COMPANY WITH THIS AMOUNT ,BUT LATER WHEN THE BUSINESS GROWS,  AUTHORISED CAPITAL CAN BE INCREASED BY ISSUING NEW SHARES TO GET ADDITIONAL FUNDS FOR THE BUSINESS. THE INCREASING  OF AUTHORISED CAPITAL IS A SET PROCEEDURE.

THE NEED OF INCREASING AUTHORISED CAPITAL ARISE IN TWO MATTER:

  • WHEN YOU WANT TO ISSUE NEW EQUITY SHARES.
  • WHEN YOU WANT TO INCREASE PAID-UP CAPITAL.

THUS, THE TOTAL VALUE OF SHARES A COMPANY IS ELIGIBLE TO ISSUE IS KNOWN AS AUTHORISED CAPITAL OF COMPANY.

 

 

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