A startup signs a term sheet, the investor is ready to wire funds, and the company goes to allot the shares — only to find its authorised capital is ₹10 lakh and the round needs ₹2 crore of headroom. A company cannot allot shares beyond its authorised limit, so the allotment stalls while everyone scrambles. The fix takes a fortnight and should have happened a month earlier.
Raising authorised capital needs only an ordinary resolution and Form SH-7 within 30 days — and it creates no shares by itself, because allotment is a separate process under Section 62.
The bottom line
Approval: an ordinary resolution, simple majority, at a general meeting — provided your Articles allow capital alteration.
Filing: Form SH-7 within 30 days, with the altered MOA, ROC fees and stamp duty on the increase.
Watch: if the Articles have no enabling clause, amend them first by special resolution, which triggers MGT-14.
What authorised capital is, and what this changes
Authorised or nominal capital is the maximum value of shares a company may legally issue, recorded in Clause V of the Memorandum. Paid-up capital, what shareholders have actually put in, sits below it. You can issue shares right up to the authorised limit and not a rupee beyond.
Section 61(1)(a) governs the alteration and Section 64 the notice of it. Companies raise the ceiling ahead of a funding round, an ESOP pool, a rights issue or any equity expansion, and the increase becomes effective once the Registrar updates the master data after SH-7.
The confusion worth clearing up front: raising authorised capital does not issue shares. It lifts the cap. Putting shares in an investor's hands is a separate Section 62 process, run afterwards.
Check the Articles first
Section 61 permits altering capital only if the Articles authorise it. Most standard Articles carry an enabling clause. If yours does not, you must amend them first by special resolution under Section 14, and that amendment triggers its own MGT-14 filing.
A frequent error in online guides is to say "file MGT-14 for the capital increase". Not quite. The resolution to increase authorised capital is an ordinary resolution, and ordinary resolutions do not attract MGT-14. You file MGT-14 only where the Articles had to be amended by special resolution. Read your capital clause before drafting anything.
The process
Section 64 with Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014 sets a short sequence.
- Board meeting to approve the proposed increase and call a general meeting.
- General meeting to pass an ordinary resolution altering Clause V of the Memorandum.
- Where needed, amend the Articles by special resolution and file MGT-14 within 30 days.
- File Form SH-7 within 30 days of the resolution with the altered MOA, paying the ROC fee and stamp duty.
- The Registrar updates the master data, and the new ceiling is live.
A compliant company should expect roughly 7 to 15 working days end to end.
The two charges
The ROC filing fee is based on the post-increase authorised capital slab.
The stamp duty is state-specific and assessed on the incremental increase rather than the new total. In many states it runs around 0.15% of the increase, though rates and caps vary widely, so check your own state's schedule under the Indian Stamp Act rather than assuming.
Both are paid electronically through the MCA portal at the time of filing.
What late filing costs
Missing the 30-day SH-7 window attracts a penalty under Section 64(2) of ₹500 per day of continuing default, subject to a maximum of ₹5 lakh for the company and ₹1 lakh for each officer in default.
It accrues daily, so a filing that slips off the list grows quietly until somebody notices.
A worked example
A company has authorised capital of ₹10 lakh and is closing a round needing ₹1 crore of fresh equity. It cannot allot until the ceiling moves.
The board approves an increase to ₹1.5 crore, the members pass an ordinary resolution, and the company files SH-7 within 30 days — paying the ROC fee on the new ₹1.5 crore slab, plus state stamp duty on the ₹1.4 crore increase rather than on the total.
Once the master data updates there is room to allot. Only then does the company run the separate Section 62 allotment to actually issue the shares. Two steps, in that order: ceiling, then shares.
Common mistakes
- Thinking the increase issues shares. It raises the cap, and allotment is separate.
- Skipping the Articles check. No enabling clause means a Section 14 amendment first, with its own MGT-14.
- Filing MGT-14 unnecessarily. The ordinary resolution to increase capital does not need it.
- Computing stamp duty on the post-increase total rather than the increment, and assuming a national rate.
- Missing the 30-day SH-7 window, at ₹500 a day.
A working routine
- Confirm the Articles permit capital alteration, and plan the Section 14 amendment first if not.
- Hold the board meeting, approve the increase and call the general meeting.
- Pass the ordinary resolution altering Clause V.
- File MGT-14 within 30 days, but only where the Articles were amended.
- File SH-7 within 30 days with the altered MOA, the ROC fee and stamp duty.
- Update the statutory registers, then run the separate Section 62 allotment.
Frequently asked questions
Does increasing authorised capital give shares to investors? No. It raises the ceiling only. Issuing shares needs a separate allotment under Section 62, whether by rights issue, private placement or otherwise.
Is a special resolution needed? Usually not. An ordinary resolution suffices under Section 61(1)(a), unless your Articles set a higher threshold or you also need to amend them.
Is MGT-14 required? Only if you amended the Articles by special resolution. The capital increase resolution itself does not attract it.
How much is stamp duty? State-specific, on the incremental increase, often around 0.15% but with significant variation and caps between states.
What is the deadline? Form SH-7 within 30 days of the resolution. Late filing runs at ₹500 a day.
Should we raise the ceiling higher than we need right now? It is common to build in headroom, since the fee is slab-based and repeating the exercise for each round costs more in time than in money.
Primary sources
- Sections 61, 64 and 14, Companies Act, 2013
- Rule 15, Companies (Share Capital and Debentures) Rules, 2014
- Companies (Registration Offices and Fees) Rules, 2014, and the relevant State Stamp Act schedule