Step-by-Step Guide
8 Steps
How to Increase Authorized Share Capital of a Company
Complete step by step guide on how to increase the authorized share capital of a company in India. Covers SH-7 form filing, board and shareholder resolutions, ROC fees, stamp duty, and MOA alteration process for 2026.
Quick Overview
Estimated Cost
₹5000
Time Required
7 to 15 Days
Total Steps
8 Steps
What You'll Need
Documents Required
- Board Resolution proposing the increase of authorized share capital
- Special Resolution or Ordinary Resolution passed at a General Meeting approving the increase
- Altered Memorandum of Association (MOA) reflecting the new authorized capital
- Copy of the existing MOA and Articles of Association (AOA)
- Certificate of Incorporation of the company
- Stamp duty payment proof (e-stamp certificate or challan) as per state stamp duty rules
- Latest audited financial statements of the company
- PAN and identity proof of all directors
- Copy of the notice of the General Meeting along with the explanatory statement
Tools & Prerequisites
- Class 3 Digital Signature Certificate (DSC) of the authorised director or Company Secretary
- Active account on the MCA V3 portal (mca.gov.in) for filing e-forms
- Internet banking, UPI, or net banking for payment of ROC fees and stamp duty
- Valid email and Indian mobile number linked to the MCA account
- Chartered Accountant (CA) or Company Secretary (CS) for professional filing
The authorized share capital of a company sets the upper limit on how many shares it can issue. When a company needs to raise additional investment, allot shares to new investors, issue bonus shares, create an ESOP pool, or accommodate a rights issue, it often needs to first increase its authorized capital before the actual share issuance can happen.
This guide covers the complete process for increasing the authorized share capital of a Private Limited Company, OPC, or Public Company in India. From understanding the difference between authorized and paid-up capital to filing Form SH-7 on the MCA portal, every step is explained clearly with the latest 2026 compliance requirements.
Understanding Share Capital Structure in India
Before diving into the process, it is important to understand the share capital structure of Indian companies.
Types of Share Capital
| Term | Meaning | Example |
|---|---|---|
| Authorized Capital | Maximum capital the company is allowed to issue (ceiling) | 10,00,000 rupees |
| Issued Capital | Portion of authorized capital offered to subscribers | 7,00,000 rupees |
| Subscribed Capital | Portion of issued capital accepted by subscribers | 6,50,000 rupees |
| Paid-Up Capital | Amount actually paid by shareholders against subscribed shares | 6,50,000 rupees |
| Called-Up Capital | Amount called by the company from subscribers (may be less than subscribed) | 6,50,000 rupees |
When the paid-up capital approaches or equals the authorized capital, the company must increase the authorized capital before issuing any new shares. This is the most common trigger for the SH-7 filing process.
When Do You Need to Increase Authorized Capital?
Here are the most common scenarios where companies need to increase their authorized share capital.
- New investment round: Angel investors, venture capital funds, or strategic investors require new shares to be issued against their investment. If the current authorized capital cannot accommodate these shares, it must be increased first
- ESOP pool creation: Companies creating employee stock option plans need reserved shares for future allotment to employees. The ESOP pool shares must be within the authorized capital limit
- Bonus share issuance: Bonus shares are issued to existing shareholders by capitalising reserves. The total shares after bonus issuance must not exceed the authorized capital
- Rights issue: Offering additional shares to existing shareholders in proportion to their current holding requires sufficient authorized capital
- Debt conversion: Convertible debentures or loans with equity conversion options require authorized capital to accommodate the converted shares
- Business expansion: Companies bringing in new shareholders or partners through share allotment need adequate authorized capital
When increasing authorized capital, do not just increase it to cover the immediate requirement. Factor in your expected share issuance needs for the next 2 to 3 years. This saves you the cost and effort of repeating the process multiple times. The incremental ROC fee and stamp duty for a slightly larger increase are usually much less than the professional fees for multiple separate filings.
Step 1: Check the Current Capital Structure
Start by verifying your company current authorized and paid-up capital on the MCA portal.
How to Check on MCA Portal
- Visit mca.gov.in and go to "MCA Services"
- Click on "View Company/LLP Master Data"
- Enter your company CIN number or name and search
- The Master Data page displays the authorized capital and paid-up capital
Also check your latest MOA to confirm the capital clause (typically Clause V) matches the MCA records. If there is a discrepancy, resolve it with the ROC before proceeding with the increase.
Step 2: Convene a Board Meeting
Hold a properly convened Board of Directors meeting with at least 7 days notice (or shorter notice with the consent of all directors). The board must pass a resolution that covers the following points.
- Current authorized capital of the company
- Proposed increase amount and revised authorized capital
- Reason for the increase (new investment, ESOP, bonus issue, etc.)
- Approval to convene an EGM for passing the ordinary resolution
- Authorization for a director or Company Secretary to file SH-7 and other necessary forms
- Approval of the notice of the General Meeting with explanatory statement
Step 3: Pass the Ordinary Resolution at a General Meeting
Section 61 of the Companies Act 2013 allows a company to increase its authorized capital by passing an ordinary resolution at a general meeting, provided the Articles of Association authorise such an increase.
EGM Notice and Explanatory Statement
Send a notice of the Extraordinary General Meeting to all shareholders at least 21 clear days before the meeting. The notice must include the full text of the proposed resolution and an explanatory statement under Section 102 explaining the reason for the increase, the amount, and how the increased capital will be utilized.
At the EGM, the resolution is passed by a simple majority (more than 50 percent of votes cast in person or by proxy). Record the proceedings in the minutes book and have the minutes signed by the chairperson.
If all shareholders consent in writing, the EGM can be convened with shorter notice (less than 21 days). This is useful when the capital increase is urgent, such as for a time-bound funding round. Get written consent from each shareholder before proceeding with shorter notice, and record the consent in the company records.
Step 4: Pay Stamp Duty on the Increased Capital
Stamp duty on the increase of authorized share capital is payable as per the stamp duty regulations of the state where the company registered office is located. The duty is calculated on the incremental increase amount.
Stamp Duty Rates by State (Indicative)
| State | Stamp Duty Rate | Example (Increase of 10 Lakh) |
|---|---|---|
| Delhi | 0.10% of increase | 1,000 rupees |
| Maharashtra | 0.15% of increase | 1,500 rupees |
| Karnataka | 0.10% of increase | 1,000 rupees |
| Tamil Nadu | 0.15% of increase | 1,500 rupees |
| West Bengal | 0.15% of increase | 1,500 rupees |
| Gujarat | 0.10% of increase | 1,000 rupees |
| Telangana | 0.15% of increase | 1,500 rupees |
Pay the stamp duty through the State e-Stamping portal or by purchasing non-judicial stamp paper of the required value. Keep the e-stamp certificate or receipt for uploading with the SH-7 form.
Step 5: File Form SH-7 on the MCA Portal
Form SH-7 must be filed with the ROC within 30 days of passing the ordinary resolution.
Step-by-Step SH-7 Filing Process
- Log in to the MCA V3 portal using your registered credentials
- Go to "MCA Services" and select "E-Filing" and then "Company Forms"
- Select Form SH-7 and enter the company CIN
- Fill in the details: current authorized capital, increased amount, revised authorized capital, date of resolution
- Specify whether the increase is in equity shares, preference shares, or both
- Upload attachments: ordinary resolution, altered MOA, minutes of meeting, stamp duty proof
- Digitally sign using the DSC of a director or Company Secretary
- Pay the ROC filing fee based on the increase amount
- Submit and note the Service Request Number (SRN)
ROC Fee Structure for SH-7
| Increase in Authorized Capital | ROC Filing Fee |
|---|---|
| Up to 1,00,000 rupees | 2,000 rupees |
| 1,00,001 to 5,00,000 rupees | 3,000 rupees |
| 5,00,001 to 10,00,000 rupees | 4,000 rupees |
| 10,00,001 to 25,00,000 rupees | 5,000 rupees |
| 25,00,001 to 50,00,000 rupees | 7,500 rupees |
| 50,00,001 to 1,00,00,000 rupees | 10,000 rupees |
| Above 1,00,00,000 rupees | 15,000 rupees |
If SH-7 is not filed within 30 days, the MCA portal charges additional fees for late filing. The late fee increases with the period of delay. To avoid unnecessary costs, file SH-7 immediately after the resolution is passed and stamp duty is paid. Most professionals complete the filing within 2 to 3 days of the EGM.
Step 6: Verify the Updated Capital on MCA Portal
After the ROC processes the SH-7 filing (typically within 3 to 5 working days), the updated authorized capital is reflected in the company Master Data on the MCA portal. Verify the following.
- The authorized capital field shows the revised amount
- The share capital breakup (equity, preference) is correctly updated
- There are no discrepancies between the MOA capital clause and the Master Data
Download the updated Master Data extract for your records and share it with your CA, CS, investors, and bank as needed.
Planning to raise investment and need to increase your authorized capital first?
Explore Our Capital Increase ServicesWhat Happens After Increasing Authorized Capital?
Increasing the authorized capital is just the first step. Here is what typically follows.
Issuing New Shares
Once the authorized capital is increased, the company can proceed with issuing new shares through:
- Private placement: Offering shares to a select group of investors (maximum 200 in a financial year) under Section 42
- Rights issue: Offering shares to existing shareholders in proportion to their current holding under Section 62
- Bonus issue: Capitalising free reserves by issuing free shares to existing shareholders under Section 63
- Preferential allotment: Issuing shares to specific investors at a price determined by the board, subject to SEBI guidelines for listed companies
Each of these share issuance methods requires filing Form PAS-3 with the ROC within 15 days of allotment along with the board resolution, list of allottees, and money received.
Capital Increase for Startups and Funding Rounds
For startups going through angel, seed, Series A, or later funding rounds, increasing authorized capital is a routine pre-investment step. Here is how it typically fits into the funding process.
- The term sheet or share subscription agreement specifies the number of shares and price per share
- The company checks if the current authorized capital can accommodate the new shares at the agreed price
- If insufficient, the company increases the authorized capital through the SH-7 process
- Once the capital is increased, the share subscription agreement is executed
- The investor transfers the investment amount to the company
- The company allots shares and files PAS-3 with the ROC within 15 days
- New share certificates are issued to the investor
Investors and their legal teams will verify that the authorized capital increase is properly documented and filed before releasing funds. Ensure the SH-7 is approved and reflected on the MCA portal before signing the share subscription agreement. Any gap in compliance can delay or derail the funding round.
Common Mistakes to Avoid
- Not checking AOA provisions: Some AOAs may require a special resolution instead of an ordinary resolution for capital increase. Always check the AOA first
- Incorrect stamp duty state: Stamp duty must be paid in the state where the registered office is located, not where the board meeting is held. Paying in the wrong state will be rejected
- Issuing shares before SH-7 approval: Allotting shares before the SH-7 is filed and the authorized capital increase is reflected on the MCA is illegal. Always complete the SH-7 process first
- Missing the 30-day deadline: Filing SH-7 after 30 days attracts late fees that can be substantial for large capital increases
- Insufficient increase amount: Increasing just enough for the current need without planning for future rounds leads to repeat filings with additional costs
- Not altering the MOA: The MOA capital clause must be formally altered to reflect the new authorized capital. Some companies forget to update the MOA document itself
Cost Summary for Authorized Capital Increase
| Cost Component | Small Increase (Up to 5 Lakh) | Medium Increase (5 to 25 Lakh) | Large Increase (Above 25 Lakh) |
|---|---|---|---|
| ROC Fee (SH-7) | 2,000 to 3,000 rupees | 4,000 to 5,000 rupees | 7,500 to 15,000 rupees |
| Stamp Duty | 500 to 750 rupees | 750 to 3,750 rupees | 3,750 rupees and above |
| Professional Fees (CA/CS) | 3,000 to 5,000 rupees | 5,000 to 8,000 rupees | 8,000 to 15,000 rupees |
| Total Estimated Cost | 5,500 to 8,750 rupees | 9,750 to 16,750 rupees | 19,250 to 33,750+ rupees |
Conclusion
Increasing the authorized share capital is a straightforward but essential corporate action that enables companies to issue new shares for investment, ESOP, bonus, or rights issue purposes. The process involves passing an ordinary resolution at a general meeting, paying stamp duty on the increase amount, and filing Form SH-7 with the ROC within 30 days.
The key to a smooth process is proper planning. Check your AOA provisions, plan for future capital needs beyond the immediate requirement, pay the correct stamp duty for your state, and file SH-7 promptly to avoid late fees. Once the authorized capital is updated on the MCA portal, you can proceed with the actual share issuance.
If you need expert assistance with increasing your authorized capital, drafting resolutions, or filing SH-7, our team at IncorpX includes experienced Company Secretaries and Chartered Accountants who handle this process regularly for startups and established companies alike.
Need to increase your company authorized share capital? Let our experts handle the entire process.
Frequently Asked Questions
What is authorized share capital?
Authorized share capital (also called nominal capital or registered capital) is the maximum amount of share capital that a company is permitted to raise from its shareholders. This ceiling is specified in the capital clause of the Memorandum of Association (MOA) and is declared at the time of incorporation. The company cannot issue shares beyond this authorized limit without first increasing it through the prescribed legal process.
What is the difference between authorized and paid-up capital?
Authorized capital is the maximum amount a company is allowed to raise by issuing shares. Paid-up capital is the portion of authorized capital that has actually been allotted to shareholders and for which the company has received payment. For example, if a company has authorized capital of 10 lakh rupees and has issued shares worth 5 lakh rupees, then the authorized capital is 10 lakhs and paid-up capital is 5 lakhs.
Why would a company need to increase its authorized capital?
Companies typically increase their authorized capital when they want to issue additional shares for purposes such as raising investment through a new funding round, allotting shares to employees under an ESOP scheme, issuing bonus shares to existing shareholders, conducting a rights issue, converting debt instruments into equity, accommodating new partners or shareholders, or when the paid-up capital is approaching the current authorized capital limit.
What is Form SH-7?
Form SH-7 is the prescribed form for notifying the Registrar of Companies (ROC) about any alteration in the share capital of a company. It must be filed within 30 days of passing the resolution for increasing the authorized capital. The form is filed on the MCA V3 portal and requires details of the current capital, increased amount, revised capital, and supporting resolutions.
Is a special resolution required to increase authorized capital?
No, an ordinary resolution (simple majority of 50 percent plus) is generally sufficient to increase the authorized share capital under Section 61 of the Companies Act 2013. However, some companies may have a provision in their Articles of Association requiring a special resolution (75 percent majority) for capital increase. Check your AOA before proceeding.
What is the ROC fee for increasing authorized capital?
The ROC fee for filing SH-7 is based on the amount of increase in authorized capital. For an increase up to 1 lakh rupees, the fee is typically 1,000 to 2,000 rupees. For increases between 1 lakh and 5 lakh, it is around 2,000 to 3,000 rupees. For larger increases, the fee can go up to 5,000 to 15,000 rupees. The exact fee schedule is available on the MCA portal.
What is the stamp duty on increase of authorized capital?
Stamp duty on the increase of authorized capital varies from state to state. It is calculated as a percentage of the incremental increase amount. For example, in Delhi and most states, the duty is approximately 0.10 to 0.15 percent of the increased amount. In Maharashtra, it is typically 0.15 percent. The stamp duty must be paid before filing SH-7, and the payment receipt must be attached.
How long does it take to increase the authorized capital?
The entire process typically takes 7 to 15 working days. This includes holding the board meeting (1 to 2 days), issuing notice for the EGM (21 days notice, though shorter notice is possible with shareholder consent), holding the EGM (1 day), paying stamp duty (1 to 2 days), and filing SH-7 on MCA portal (1 to 3 days for ROC processing). With proper planning, the process can be completed faster.
Can I increase the authorized capital during incorporation?
The authorized capital is declared at the time of incorporation through the SPICe+ form. If you realize the initial authorized capital is insufficient before the company becomes operational, you can increase it immediately after incorporation by following the standard process of board resolution, EGM, stamp duty, and SH-7 filing.
What happens if I issue shares beyond the authorized capital?
Issuing shares beyond the authorized capital is illegal and void. Any allotment of shares exceeding the authorized capital limit has no legal validity. The company and its officers can face penalties under the Companies Act. If additional shares are needed, the authorized capital must first be increased through the proper process before any new allotment can be made.
Can an LLP increase its authorized capital?
LLPs do not have the concept of authorized share capital in the same way as companies. LLPs have contribution obligations, and the total obligation amount is declared at incorporation. To change the capital contribution, LLPs amend their LLP Agreement and file the changes with the ROC. The LLP compliance framework is different from companies in this regard.
Is there a minimum or maximum authorized capital?
There is no minimum authorized capital requirement for Private Limited Companies in India since the Companies (Amendment) Act 2015 removed the earlier minimum of 1 lakh rupees. There is also no statutory maximum limit on authorized capital. However, the ROC fees and stamp duty increase proportionally with higher authorized capital, so companies should set it at a practical level based on current and future needs.
Do I need to alter the MOA for increasing authorized capital?
Yes, increasing the authorized capital requires altering the capital clause (Clause V) of the Memorandum of Association. The altered MOA reflecting the new authorized capital must be attached when filing Form SH-7 with the ROC. The alteration is effective from the date of passing the ordinary resolution, not the date of ROC filing.
What is the relationship between authorized capital and funding rounds?
Before a new funding round, the company must ensure sufficient authorized capital to accommodate the new shares being issued to investors. If the current authorized capital is insufficient, it must be increased before the share subscription agreement is executed. Investors and their legal teams typically verify the authorized capital as part of due diligence before closing a funding round.
Can authorized capital be decreased?
Yes, a company can reduce its authorized capital by passing an ordinary resolution to cancel shares that have not been taken up or allotted. However, reducing paid-up capital (through capital reduction) requires a more complex process involving a special resolution and approval from the National Company Law Tribunal (NCLT) under Section 66 of the Companies Act. The ROC fee refund may not be available after reduction.
What is the difference between increasing authorized capital and issuing shares?
Increasing authorized capital merely raises the ceiling on how many shares the company can issue. It does not actually create new shares or bring in any money. Issuing shares (allotment) is the separate process of actually creating and distributing shares to investors or shareholders, which brings in capital. The allotment is done through rights issue, private placement, or other methods and requires filing Form PAS-3.
Does increasing authorized capital change the ownership percentages?
No, increasing the authorized capital alone does not change ownership percentages because no new shares are issued. Ownership percentages change only when new shares are actually allotted to shareholders. However, future allotment of the increased authorized shares will dilute existing shareholders holdings unless they participate proportionally in the new issuance.
What attachments are required for SH-7 filing?
The following attachments are required: certified true copy of the ordinary resolution (or special resolution if required by AOA), copy of the altered MOA showing the new capital clause, minutes of the general meeting, notice of the general meeting with explanatory statement, stamp duty payment proof (e-stamp certificate or challan), and board resolution proposing the capital increase.
Can I increase the authorized capital without holding an EGM?
An ordinary resolution is mandatory for increasing authorized capital, and this resolution must be passed at a general meeting. However, Private Limited Companies can pass ordinary resolutions through postal ballot or electronic voting if permitted by their AOA, which may eliminate the need for a physical EGM. Additionally, if the increase is approved at the AGM, a separate EGM is not needed.
What is the impact on annual compliance after capital increase?
After increasing the authorized capital, the company annual return (Form MGT-7) must reflect the updated capital structure. The annual compliance filings, including AOC-4 financial statements, must show the authorized capital as per the altered MOA. The ROC annual filing must be consistent with the updated Master Data on the MCA portal.
Is there a ROC fee difference between increase and decrease of capital?
Yes, ROC fees differ between capital increase and decrease. For increasing authorized capital, the ROC charges fees based on the incremental increase amount. For cancellation of unissued share capital (reduction of authorized capital), the fee structure is different and generally lower. The fee schedule is published on the MCA portal and is updated periodically.
Can a company increase authorized capital if it has pending compliance?
While there is no explicit legal bar preventing a company with pending compliance from increasing its authorized capital, the MCA portal may flag issues or put filings on hold if the company has significant pending e-forms or compliance defaults. It is strongly recommended to clear all pending filings, including annual returns and financial statements, before initiating the capital increase process.
How does stamp duty calculation work for capital increase?
Stamp duty is calculated on the differential amount, not the total revised authorized capital. For example, if the authorized capital is being increased from 10 lakh to 50 lakh rupees, stamp duty is calculated on 40 lakh rupees (the increase amount). If the company subsequently increases from 50 lakh to 1 crore, stamp duty is again calculated on the new incremental amount of 50 lakh rupees. The rate varies by state.
Can a One Person Company increase its authorized capital?
Yes, a One Person Company (OPC) can increase its authorized capital by following the same process. The sole member passes the ordinary resolution, and the company files SH-7 with the ROC. If the OPC turnover exceeds 2 crore rupees or paid-up capital exceeds 50 lakh rupees, it must mandatorily convert to a Private Limited Company, which may require a capital increase as part of the conversion process.
What role does the Company Secretary play in capital increase?
The Company Secretary is responsible for drafting the board resolution and shareholder resolution, preparing the notice of the general meeting with explanatory statement, coordinating the stamp duty payment, filing SH-7 and MGT-14 on the MCA portal, altering the MOA, and maintaining the Register of Members. For companies without a CS, these tasks are handled by a practising Company Secretary or a director authorised by the board.
Can the authorized capital increase be done retrospectively?
No, the increase in authorized capital takes effect from the date of passing the ordinary resolution, not retrospectively. All share allotments made after this date and up to the new authorized capital limit are valid. Any shares allotted before the resolution date in excess of the previous authorized capital limit are void and illegal regardless of when the SH-7 is filed.
What are the penalties for not filing SH-7 on time?
Form SH-7 must be filed within 30 days of passing the ordinary resolution. If filed after this deadline, the MCA charges additional late fees on a daily or slab basis depending on the period of delay. Persistent non-filing can attract penalties under the Companies Act, with fines for the company and each defaulting officer. It is advisable to file SH-7 immediately after the resolution to avoid unnecessary penalties.
How does authorized capital relate to company valuation?
Authorized capital alone does not directly determine company valuation. Valuation is based on factors like revenue, profitability, assets, liabilities, growth prospects, and market conditions. However, a higher authorized capital allows the company to issue more shares for funding rounds, which indirectly supports growth and can positively impact valuation. Investors look at the authorized capital to assess the company capacity to accommodate their investment.
Can I convert preference shares to equity shares during capital increase?
Converting preference shares to equity shares does not require increasing the authorized capital unless the conversion would cause the total share capital to exceed the current authorized limit. If the authorized capital is sufficient, conversion can proceed without SH-7 filing. However, if additional authorized capital is needed to accommodate the conversion, increase it before proceeding.
What is the difference between SH-7 and PAS-3?
SH-7 is filed to notify the ROC about changes in the authorized or issued share capital structure, such as increasing authorized capital. PAS-3 is filed to report the allotment of new shares to investors or shareholders. SH-7 changes the ceiling, while PAS-3 records the actual issuance. In a typical funding round, SH-7 is filed first to increase the authorized capital, and PAS-3 is filed after the shares are allotted.
Does capital increase require a valuation report?
Increasing the authorized capital itself does not require a valuation report. However, if the purpose of the increase is to issue new shares to investors at a premium (above face value), a valuation report from a Chartered Accountant or registered valuer may be required for the subsequent share allotment, especially under Section 42 for private placement or under FEMA regulations for allotment to non-residents.
Can I increase authorized capital from 1 lakh directly to 1 crore?
Yes, there is no restriction on the quantum of increase. You can increase the authorized capital from 1 lakh rupees to 1 crore rupees or any other amount in a single ordinary resolution. However, keep in mind that the ROC filing fee and stamp duty are proportional to the increase amount. A larger increase will have higher associated costs. It is practical to increase to a level that covers your needs for the next 2 to 3 years.
What is the process for increasing authorized capital of a Section 8 company?
The process is the same for a Section 8 company as for any other company. Pass an ordinary resolution, alter the MOA, pay stamp duty, and file SH-7. However, Section 8 companies have restrictions on distributing profits, so the increase is typically used to accept larger donations or grants rather than for equity investment. Additional approvals from the Central Government may be required under certain circumstances.
How does table F of the Companies Act relate to capital increase?
Table F of Schedule I of the Companies Act 2013 contains the default Articles of Association for companies limited by shares. If your company follows Table F (which most do unless custom AOA is adopted), it provides standard provisions allowing the company to increase authorized capital by ordinary resolution. Check Table F provisions if your company has adopted the standard AOA format.
Can authorized capital be increased in multiple tranches?
Yes, a company can increase its authorized capital in multiple stages or tranches as per its needs. Each tranche requires a fresh ordinary resolution, stamp duty payment, and SH-7 filing. This is common in startups that go through multiple funding rounds, increasing authorized capital each time before issuing new shares to investors.
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