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Before you can allot new shares to an investor, your authorised capital has to be high enough to fit them. Raising that ceiling is a quick, ordinary-resolution job — but it's a separate step that creates no shares by itself.

The deadline: file Form SH-7 within 30 days of the shareholder resolution, with stamp duty on the increase.

A startup signs a term sheet, the investor is ready to wire funds, and the company goes to allot the new 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, full stop. So the allotment stalls while the company scrambles to raise the ceiling first. It's an avoidable delay, because raising authorised capital is one of the simplest corporate actions there is — if you do it before you need it.

The single most common confusion here: increasing authorised capital does not issue shares. It just lifts the cap. Actually putting shares in investors' hands is a separate Section 62 process.

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 AOA has no enabling clause, amend it first by special resolution (which triggers MGT-14).

What is authorised capital — and what this changes

Governs this section: Section 61(1)(a) & Section 64, Companies Act, 2013

Authorised (or nominal) capital is the maximum value of shares a company is legally allowed to issue, recorded in Clause V of the Memorandum of Association. Paid-up capital — what shareholders have actually put in — sits below it. You can issue shares right up to the authorised limit, but not a rupee beyond.

Companies raise the ceiling ahead of a funding round, an ESOP pool, a rights issue, or any equity expansion. Section 61 governs the alteration; the actual increase becomes effective once the ROC updates the master data after your SH-7.

Check the Articles first

Governs this section: Section 14

This is the step that catches people. Section 61 lets you alter capital only if the Articles authorise it. Most standard AOAs contain an enabling clause — but if yours doesn't, you must amend the AOA first, by special resolution under Section 14, and that amendment triggers a separate MGT-14 filing.

PRACTITIONER'S NOTE

A frequent error in online guides is saying "file MGT-14 for the capital increase." Not quite. The resolution to increase authorised capital is an ordinary resolution, and ordinary resolutions don't attract MGT-14. You only file MGT-14 if you had to amend the AOA by special resolution. Check your AOA's capital clause before you draft anything.

The process and forms

Governs this section: Section 64 & Rule 15, Companies (Share Capital and Debentures) Rules, 2014

The flow is short:

  1. Board meeting: approve the proposed increase and call a general meeting (EGM).
  2. EGM: pass an ordinary resolution altering Clause V of the MOA.
  3. (If needed) amend the AOA by special resolution; file MGT-14 within 30 days.
  4. File Form SH-7 within 30 days of the resolution, with the altered MOA (e-MOA / INC-33), paying ROC fees and stamp duty.
  5. ROC updates the master data — the new ceiling is now live.

Typical turnaround is roughly 7–15 working days for a compliant company.

Stamp duty and ROC fees

Governs this section: Indian Stamp Act (state schedules); Companies (Registration Offices and Fees) Rules, 2014

Two charges apply at SH-7:

  • ROC filing fee — based on the post-increase authorised capital slab.
  • Stamp duty — state-specific, assessed on the incremental increase (not the new total). In many states it's around 0.15% of the increase, but rates and caps vary widely by state, so check yours.

Both are paid electronically through the MCA portal at the time of filing.

What does late filing cost?

Governs this section: Section 64(2)

PENALTY — Section 64(2)

Missing the 30-day SH-7 window attracts a penalty 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's a daily-accruing default, so a forgotten filing quietly grows.

Worked example

Mini-case — making room for a round

A company has authorised capital of ₹10 lakh and is closing a round needing ₹1 crore of fresh equity. It can't allot until the ceiling is raised. 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. Once the master data updates, there's room to allot. Only then does the company run the separate Section 62 allotment to actually issue the shares. Two steps, in order — ceiling, then shares.

Common mistakes

  1. Thinking the increase issues shares. It only raises the cap. Allotment is a separate Section 62 process.
  2. Skipping the AOA check. No enabling clause means you must amend the AOA by special resolution first (and file MGT-14).
  3. Filing MGT-14 unnecessarily. The ordinary resolution to increase capital doesn't need MGT-14 — only the AOA amendment does.
  4. Computing stamp duty on the wrong base. It's on the incremental increase, not the post-increase total — and varies by state.
  5. Missing the 30-day SH-7 window. ₹500/day adds up.

Checklist

  1. Confirm the AOA permits capital alteration; if not, plan the Section 14 amendment first.
  2. Hold a board meeting; approve the increase and call the EGM.
  3. Pass the ordinary resolution altering Clause V of the MOA.
  4. File MGT-14 (only if the AOA was amended) within 30 days.
  5. File SH-7 within 30 days with the altered MOA, ROC fee and stamp duty.
  6. Update statutory registers; then run the separate Section 62 allotment to issue shares.

FAQ

Does increasing authorised capital give shares to investors? No. It only raises the ceiling. You still need a separate allotment (rights issue, private placement, etc.) under Section 62 to issue shares.

Is a special resolution needed? Usually no — an ordinary resolution suffices under Section 61(1)(a), unless your AOA requires a higher threshold or you also need to amend the AOA.

Is MGT-14 required? Only if you amend the AOA by special resolution. The capital-increase resolution itself doesn't attract MGT-14.

How much is stamp duty? State-specific, on the incremental increase — often around 0.15% but with significant variation and caps by state.

What's the deadline? Form SH-7 within 30 days of the resolution; late filing is ₹500/day.

Primary sources

  • Sections 61, 64 & 14, Companies Act, 2013
  • Rule 15, Companies (Share Capital and Debentures) Rules, 2014
  • Companies (Registration Offices and Fees) Rules, 2014; relevant State Stamp Act schedule

Disclaimer: This article is general information on a fast-changing area of company law, current at the time of writing. It is not legal or professional advice for any specific company. Verify the position against the live MCA rules and your state's stamp law, and consult your company secretary before filing.