Procedure for Increase in Authorised Share Capital

Procedure for Increase in Authorised Share Capital

If you're a company looking to increase your authorised share capital, it's important to know the proper procedures to follow. 

In this blog post, we'll cover all the key points you need to know, including why you might need to increase your authorised share capital, how to increase the authorised share capital, and what the consequences are if you don't follow the proper procedures.

What is the procedure for increasing the authorised share capital?

If a company wants to increase its authorised share capital, it must pass a resolution at a shareholders' meeting. 

The resolution must state the increased amount and the new authorised share capital. A majority must also approve of the shareholders present at the meeting.

Once the resolution has been passed, the company must file an application with the Registrar of Companies to register the increase in authorised share capital. 

The application must include a copy of the resolution and the articles of association or memorandum of association of the company.

The Registrar of Companies will then issue a certificate of incorporation, which will state the new authorised share capital of the company.

Why is it necessary to increase the authorised share capital?

There are a number of reasons why a company may need to increase its authorised share capital. 

The most common reason is that the company needs to raise additional funds for general working capital purposes or to finance specific projects. 

The company can raise the necessary funds by issuing new shares without taking on debt or diluting existing shareholders' equity.

Another reason to increase authorised capital is to give the company flexibility in issuing new shares in the future. 

For example, if the company wants to implement a share buy-back program, it will need to have sufficient authorised share capital so that it can repurchase shares as needed.

Alternatively, if the company wants to issue shares as part of an employee incentive program, it will need to make sure it has enough authorised share capital available.

Finally, authorised share capital may need to be increased if the company changes its legal structure, such as converting from a private limited company to a public limited company. 

In this case, the new authorised share capital will reflect the increased number of shares that can be issued under the new legal structure.

How can the authorised share capital be increased?

There are a few ways to increase the authorised share capital. One way to increase the authorised share capital is by conversion of old shares into new ones. 

Additionally, an increase in the number of members on the board of directors can also lead to an increase in the authorised share capital. 

Another way is by issuing convertible securities that allow shareholders to convert their shares into an equity stake in the company. 

Some other methods include: (1) issuing bonus shares to employees or directors; (2) issuing rights or warrants to purchase additional shares at a set price; and (3) issuing long-term debt that is convertible into shares at a set conversion rate. 

However, the most common way is by issuing new shares:

  • The company can issue new shares directly to shareholders. 
  • The company can also issue new shares through a public offering.
  •  Another way in which the company can issue new shares is through a rights issue.
  • Finally, one way in which the company can issue new shares is by issuing non-voting equity securities. 

It's important to note that each of these methods has its own benefits and drawbacks, so it's important to choose the one that best suits your company's needs.

When is the process of increasing the authorised share capital likely to be completed?

Assuming all goes well, the process of increasing the authorised share capital should be completed within a few weeks. 

The whole process can be completed fairly quickly if there are no hiccups along the way. 

However, it's important to note that shareholders may only sometimes approve of an increase authorised capital. 

In some cases, they may feel that it's unnecessary or that it will dilute their equity too much. 

In these instances, the directors may need to negotiate with shareholders before proceeding with the increase.

Overall, increasing authorised share capital is a relatively straightforward process. 

However, it's important to ensure all stakeholders are on board before proceeding. 

Once everything is approved, the process should be completed within a few weeks.

What are the consequences of not following the procedures for increase authorised capital?

If a company does not follow the proper procedures for increasing its authorised share capital, there can be a number of consequences. 

First, the company may be required to hold another shareholder meeting to get approval for the increase. 

This can be costly and time-consuming and may delay the company's plans to raise additional funds.

Second, the company may be subject to fines or other penalties from regulatory bodies such as Companies House. 

This is particularly likely if the company did not file the necessary paperwork in a timely manner.

Third, shareholders may object to the increase in authorised share capital if they feel it is not in the company's best interests. 

This could lead to legal action against the directors, which could be costly and time-consuming.

Fourth, increasing authorised share capital without following proper procedures could have a negative impact on the company’s reputation. 

This could make it more difficult to raise additional funds in the future, as investors may be reluctant to invest in a company that does not follow proper corporate governance procedures.

Finally, if the increase authorised capital is not done properly, it could lead to problems with the company’s articles of association. This could ultimately result in the dissolution of the company.

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FAQs

What will happen as a result of the resolution to increase authorised share capital?

As a result of the resolution to increase authorised share capital, investors will be able to purchase shares at a discounted price. This should help boost stock prices and make it more affordable for consumers and businesses. Additionally, this could lead to increased investment in the company's operations which would benefit its shareholders over time.

When will the resolution increase authorise share capital to be passed?

The resolution to increase authorised share capital will be passed when it receives the requisite number of approvals from shareholders.

Will submit a resolution to increase authorised share capital impact stock prices?

There is no definitive answer as to whether or not submitting a resolution to increase authorised share capital will impact stock prices since this ultimately depends on the specific situation and company. However, you are concerned about the potential implications of such a move on your company's shares. In that case, it may be wiser to avoid submitting until more analysis surrounds its potential consequences.

How to increase authorised share capital?

You can increase your authorised share capital in a few ways. You may be able to issue new shares, convertible securities or rights issues. Additionally, you may be able to purchase existing shares at a discounted price, and merger or acquisition activities could also result in an increase in the authorised share capital.

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