Increasing the authorised capital can help bring in more capital by issuing more shares
to your current promoters or by bringing in new share holders.
The maximum number of shares a private limited company can issue is decided by its authorised capital. Most start-ups start their journey with the minimum authorised capital of Rs. 1 lakh, but this is too little as the business grows. To issue new shares or raise the capital a company is authorised to raise, the capital clause of the Memorandum of Association needs to be amended by passing a special resolution of the board. If, at this point, you may also need shares to be issued to existing promoters or new shareholders.
If you are increasing the authorised capital and issuing new shares to existing promoters, a board meeting needs to be called and Form PAS-3 needs to be filed with the Registrar of Companies (RoC), intimating the allotment of shares.
Issuing shares to new shareholders is a complicated procedure, necessitating a valuation report from a chartered accountant.
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