How to Increase Authorised Share Capital (Form SH-7)

A company cannot issue shares beyond its authorised capital. To raise the limit, it must pass an ordinary resolution in a general meeting under Section 61 of the Companies Act, 2013, alter the capital clause of its Memorandum of Association (MoA), and file Form SH-7 with the Registrar of Companies (RoC) within 30 days under Section 64. The RoC fee and stamp duty depend on the size of the increase and your state.

What is authorised capital vs paid-up capital?

• Authorised capital is the maximum share capital the company is allowed to issue, as stated in its MoA.
• Paid-up capital is what shareholders have actually subscribed and paid for.

A company with ₹10 lakh authorised and ₹1 lakh paid-up can issue ₹9 lakh more without any change. Once a fundraise, ESOP pool or conversion of loans needs more, the authorised capital must go up first.

When do you need to increase authorised capital?

• Before a seed or angel round where new shares exceed the headroom
• Before issuing bonus shares
• Before converting convertible notes or CCPS into equity
• When creating an ESOP pool
• When a lender or investor asks for higher paid-up capital

Step-by-step procedure

1. Check the Articles of Association (AoA). Section 61 requires the AoA to authorise an increase. Most modern AoAs do. If the capital figure is also written in the AoA, amending it needs a special resolution and a Form MGT-14 filing.
2. Hold a board meeting to approve the proposal, fix the date of the general meeting and approve the notice.
3. Send the notice of the extraordinary general meeting (EGM) with an explanatory statement. 21 clear days' notice, or shorter notice with consent of at least 95% of members (Section 101).
4. Pass the ordinary resolution at the EGM altering clause V of the MoA.
5. File Form SH-7 on the MCA V3 portal within 30 days, attaching the resolution, the altered MoA and the EGM notice. Pay the RoC fee and stamp duty online.
6. Update statutory registers and keep the altered MoA with the minutes.

Only after SH-7 is approved should you issue the new shares (through PAS-3 for allotments).

What does it cost?

Cost item	Basis
RoC filing fee	Slab-based on the amount of increase, under the Companies (Registration Offices and Fees) Rules, 2014
Stamp duty	Charged by the state on the increase in authorised capital; paid through MCA along with SH-7
Professional fees	Drafting notices, resolutions and filing

Stamp duty varies considerably by state, so a Karnataka company pays differently from a Maharashtra one. We give you the exact figure before filing.

Penalty for late filing of SH-7

• Additional fees on the MCA portal for every day of delay after 30 days.
• Section 64(2): the company and every officer in default are liable to a penalty of ₹500 per day of default, up to ₹5 lakh for the company and ₹1 lakh for each officer.

Late SH-7 filings often surface during investor due diligence, and closing is delayed until they are regularised.

Worked example: seed round

A Bengaluru startup has ₹10 lakh authorised capital and ₹1 lakh paid-up (10,000 shares of ₹10). An investor is taking 25% through 3,334 new shares, and the founders want a 10% ESOP pool.

Shares after round and pool: roughly 14,815. Face value needed: about ₹1.48 lakh, well within ₹10 lakh. No increase is needed.

If the same round instead issued CCPS convertible into 1,00,000 equity shares, the post-conversion capital of ₹11 lakh exceeds the limit, and SH-7 must be filed before the conversion.

Watch out: small company status

A private company is a "small company" if its paid-up capital is up to ₹4 crore and turnover is up to ₹40 crore. Increasing authorised capital does not affect this, but increasing paid-up capital beyond ₹4 crore does. Losing small company status brings a mandatory cash flow statement, auditor rotation and stricter board meeting requirements.

How SP & SC helps

We draft the board and EGM resolutions, the altered MoA and the notices, file SH-7 and MGT-14 where needed, calculate state stamp duty and handle the follow-on PAS-3 allotment. See our annual filings and compliance service or ask for a fixed-fee quote.

Frequently asked questions

Is a special resolution required to increase authorised capital?

Usually an ordinary resolution is enough under Section 61. A special resolution is needed only if the capital figure is also in the AoA.

What is the due date for Form SH-7?

Within 30 days of passing the resolution.

Can an OPC increase authorised capital?

Yes. The sole member's written resolution takes the place of a general meeting, and SH-7 is filed the same way.

Is MGT-14 required for increasing authorised capital?

Only if a special resolution is passed. An ordinary resolution under Section 61 does not require MGT-14.

Can authorised capital be reduced later?

It can be cancelled to the extent unissued under Section 61(1)(e), again through SH-7. Reducing paid-up capital is a separate, stricter process under Section 66.