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Increase Authorized Capital

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Increase Authorized Capital

When a company needs to increase its authorized capital, certain procedures and requirements need to be followed. While the specific process may vary depending on the jurisdiction and the company’s articles of association, here is a general outline of the content typically involved in increasing authorized capital.
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  • Authorized Capital is defined as the capital that is authorised by the memorandum of the company to be the maximum amount of the share capital of the company in accordance with Section 2 (8) of the Companies Act, 2013. This definition can be found in the Companies Act, 2013. It is possible for the company to grow its operations up to the level of the authorised capital. To remain operational, every business will eventually require an increased amount of capital. It’s possible that you’ll need these funds in the long term or the short term. Taking out loans and advances is one way to satisfy a need that is only temporary. However, in order to run the race, the company will need additional funds. In the case of a Private Limited Company, this can be accomplished by raising the total amount of the company’s authorised capital. Because the Company Act governs and regulates private limited companies, in order to make any changes to the company’s structure, it is necessary to follow the Act as well as the rules that are stated.
  • When registering a Private Limited Company, the Memorandum of Association (MOA) of the company is where the authorised and paid-up capital is specified. As a result, the company is able to issue new shares, but only up to the level of the authorised capital that is specified in the MOA. If the company wants to issue more shares than the maximum number that is allowed, then the company’s operating agreement (MOA) will need to be amended.
  • Before it can increase its paid-up capital or issue new equity shares, a company might find it necessary to first increase the total amount of its authorised share capital. Because the total value of the shares that a company is permitted to issue makes up the authorised share capital. The total value of all of the shares that have been issued by the company is what is referred to as the paidup capital. The amount of authorised capital is not exceeded by the amount of paid-up capital. Therefore, if the company wishes to induct new shareholders and has authorised capital of Rs.10 lakh and paid-up capital of Rs.10 lakhs, then this can be accomplished by the other means.

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