Legal basis: Section 61(1)(a) and Section 64(1)-(2), Companies Act 2013, read with Rule 15 of the Companies (Share Capital and Debentures) Rules 2014 — Effective: ongoing. Source: https://indiacode.nic.in/bitstream/123456789/13871/1/the-companies-act-2013.pdf. Last reviewed by CA Harun Raaj: September 2026.
If your company is bringing in a new investor, adding a co-founder, or setting up an ESOP pool, and the new shares you plan to issue would push paid-up capital above what your Memorandum of Association (MOA) currently permits, you cannot issue those shares yet. You must first increase your authorised share capital — the ceiling stated in your MOA — and report that increase to the Registrar of Companies (ROC) using Form SH-7.
Key point: Once your company passes the ordinary resolution to increase authorised share capital, Form SH-7 must reach the ROC within 30 days, or a per-day penalty under Section 64(2) starts running.
Authorised Capital vs Paid-Up Capital: Why This Trips Up Founders
Authorised share capital is not the same as paid-up capital. Authorised capital is the maximum a company is permitted to issue under its MOA. Paid-up capital is what has actually been issued and paid for. A company incorporated with ₹1,00,000 of authorised capital (10,000 shares of ₹10 each) cannot issue ₹5,00,000 worth of new shares to an investor without first raising the authorised ceiling — in this example, to at least ₹6,00,000 once the original shares are accounted for.
Situations Where You Must Increase Authorised Capital First
- Issuing new equity or preference shares that would push paid-up capital above the current authorised limit.
- Converting debt into equity beyond the company's existing headroom.
- Creating an ESOP pool that requires share issuance beyond the authorised limit.
- Complying with a court or tribunal order requiring fresh share allotment.
Who Can Approve the Increase
Section 61(1)(a) allows a company to increase authorised capital only if its Articles of Association (AOA) permit it. Most standard post-2013 AOAs include this power. If the AOA is silent or restrictive, it must first be amended by special resolution. Once that power exists, the increase itself needs only an ordinary resolution passed at a general meeting — not a special resolution.
The Filing Process, Step by Step
Step 1 — Board resolution. The board approves the proposed increase and convenes an Extra-ordinary General Meeting (EGM), unless the increase is taken up at the AGM. Board meeting notice and quorum should follow Secretarial Standard 1 (SS-1).
Step 2 — EGM notice. Shareholders get a minimum 21 days' notice (shorter notice is possible only with consent from members holding at least 95% of paid-up capital, under Section 101), along with the explanatory statement required by Section 102.
Step 3 — Ordinary resolution at EGM. Shareholders approve the increase and the corresponding change to Clause V of the MOA by simple majority. Secretarial Standard 2 (SS-2) governs quorum, voting, and minutes.
Step 4 — File Form SH-7 within 30 days. The 30-day clock starts from the date the resolution is passed, not the EGM notice date. The filing goes on the MCA V3 portal under Rule 15 of the Companies (Share Capital and Debentures) Rules 2014 and Section 64(1). Attachments include the certified resolution, the altered MOA (Clause V), and the EGM notice with explanatory statement.
Step 5 — Pay state stamp duty. Stamp duty on the altered MOA is state-specific and generally applies to the incremental capital increase, not the total. Refer to your state's stamp duty schedule before filing.
Step 6 — Update records. Once the ROC approves Form SH-7, update the statutory registers, the MOA, and the board minutes to reflect the new authorised capital.
What Happens If You File Late
These figures come directly from Section 64(2) and the small company relief under Section 446B. A company that passes its resolution and files 16 days late, for instance, would face ₹16,000 in penalty at the standard rate, or ₹8,000 as a small company — before the ROC even processes the form.
Where This Fits With Fundraising
A capital increase is usually one step in a larger sequence when a company raises money: EGM (ordinary resolution for capital increase) → ROC approval of Form SH-7 → board resolution for allotment → shareholder approval for preferential allotment → actual allotment → Form PAS-3 filing to report the allotment. Form SH-7 only raises the ceiling; it does not itself issue shares.
Can HRA Handle This for You?
Increasing authorised share capital touches board process, shareholder notice timelines, MOA drafting, state stamp duty, and an ROC filing with a hard 30-day deadline. HRA's team can manage the Form SH-7 filing and the associated MOA amendment for your company on a flat fee, so your fundraise or ESOP pool isn't held up by a missed compliance window.
I'm CA Harun Raaj. If this affects your company's compliance calendar, reach out.
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See Also
Frequently asked questions
What is the deadline to file Form SH-7 after increasing authorised capital?
Form SH-7 must be filed within 30 days of passing the ordinary resolution, under Section 64(1) of the Companies Act 2013 read with Rule 15 of the Companies (Share Capital and Debentures) Rules 2014. The 30-day clock starts from the resolution date, not the EGM notice date.
What is the penalty for filing Form SH-7 late?
Under Section 64(2), the penalty is ₹1,000 per day of default, capped at ₹5,00,000. Small companies get relief under Section 446B, halving this to ₹500 per day, capped at ₹2,50,000.
Does increasing authorised share capital need a special resolution?
No. Under Section 61(1)(a), the increase itself only needs an ordinary resolution passed at a general meeting, provided the Articles of Association already permit such alteration. If the AOA does not permit it, that AOA amendment separately requires a special resolution.
What is the difference between authorised, issued, and paid-up capital?
Authorised capital is the maximum a company's MOA permits it to issue. Issued capital is the shares actually allotted. Paid-up capital is the portion of issued shares actually paid for by shareholders. Form SH-7 raises only the authorised ceiling; actual allotment still requires a separate Form PAS-3 filing.
Can authorised capital be increased at the same time as a fundraise?
Yes, and this is common practice. The typical sequence is: EGM ordinary resolution for the capital increase, ROC approval of Form SH-7, board resolution for allotment, shareholder approval for preferential allotment under Section 62(1)(c), the actual allotment, and then Form PAS-3.
Is stamp duty payable when increasing authorised share capital?
Yes, stamp duty on the altered MOA is payable at state-specific rates, generally on the incremental increase rather than the total authorised capital. Check your state's stamp duty schedule before filing Form SH-7.
Can a company hold the EGM for a capital increase without a physical meeting?
Under Section 122, One Person Companies can act by resolution without holding a meeting. Other private companies generally require a proper EGM, which can be conducted physically or via video conferencing as permitted under Rule 3 of the Companies (Meetings of Board and its Powers) Rules 2014.
What documents must be attached to Form SH-7?
The filing requires a certified copy of the ordinary resolution, the altered Memorandum of Association reflecting the new authorised capital under Clause V, and the EGM notice along with its Section 102 explanatory statement.
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