Authorised capital is the number number of shares a Private Limited company can issue to its shareholders. Mostly, a company is set up with the minimum authorised capital of Rs1 lakh by issuing shares with a value of Rs1 lakh or less to founding members, but this proves to be inadequate as the company expands its business.
To issue new shares or raise its authorised capital, the company needs to amend the capital clause of the Memorandum of Association (MOA by passing a special resolution its Board meeting. In the process, the company may also need to issue shares to existing promoters or new shareholders.
New shares can be issued to existing promoters with shareholders’ approval and by making the necessary changes to the MOA and AOA of the company and paying additional fee to the Registrar of Companies to increase the authorised capital. For this, a Board meeting needs to be called and the Registrar of Companies (RoC) needs to be intimated about the allotment of shares by filing Form PAS-3.
Shares can be issued to new shareholders, along with a valuation report from a chartered accountant.
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