Is stamp duty payable on authorized capital increase?

Yes. Stamp duty at state-specific rates (typically 0.1–0.15% of incremental capital) is payable and must be paid before or at the time of SH-7 filing.

Authorized Capital Increase for Companies

Q: What is the difference between authorized capital and paid-up capital?

Authorized capital is the maximum permissible share capital in the MOA. Paid-up capital is the amount actually received from shareholders. Paid-up capital cannot exceed authorized capital.

Q: What is the process for increasing authorized capital?

The process involves a Board Meeting, EGM with Ordinary Resolution, MOA amendment, SH-7 filing within 30 days, and payment of applicable stamp duty.

Q: Can a company reduce its authorized capital?

Yes, by amending the Capital Clause of the MOA. Authorized capital reduction (unlike paid-up capital reduction) generally does not require NCLT approval.

Q: Does increasing authorized capital automatically increase paid-up capital?

No. After increasing authorized capital, the company must separately pass a Board Resolution, allot shares, issue certificates, and file PAS-3 to increase paid-up capital.

Complete Guide to Increasing a Company's Authorized Share Capital Under Section 61 of the Companies Act, 2013

A company's authorized share capital is the maximum amount of share capital that a company is legally permitted to issue to its shareholders, as stated in the Memorandum of Association (MOA). Before a company can issue new shares — whether for fundraising, allotment to employees under ESOPs, conversion of debt to equity, or bringing in new investors — the proposed allotment must not exceed the authorized capital limit.

Increasing authorized capital requires an Ordinary Resolution passed by shareholders in a General Meeting, followed by amendment of the MOA and filing of Form SH-7 with the Registrar of Companies. Our services cover the complete process — from drafting the resolution and amended MOA clause to filing SH-7 and paying the applicable stamp duty — ensuring your company has the headroom to issue shares as business needs evolve.

Our Authorized Capital Increase Services

AOA & MOA Review

Review of the company's Memorandum and Articles of Association to confirm the existing authorized capital, check for any restrictions, and determine the extent of increase required for the proposed allotment.

Resolution Drafting

Drafting of the Board Resolution to convene an EGM or pass resolution by circulation, and the Ordinary Resolution of shareholders for increase in authorized share capital.

MOA Amendment

Drafting of the amended Capital Clause (Clause V) of the Memorandum of Association reflecting the new authorized capital amount and the revised share structure.

SH-7 Filing on MCA21

Preparation and filing of Form SH-7 on the MCA21 portal within 30 days of passing the shareholder resolution, with payment of ROC filing fees and applicable stamp duty.

Stamp Duty Computation

Computation of applicable stamp duty on the increase in authorized capital based on the state in which the company's registered office is located, and assistance with online payment.

Post-Increase Share Allotment

End-to-end assistance with share allotment following the capital increase — including PAS-3 filing, share certificate issuance, and updating the register of members.

Key Facts About Authorized Capital Increase

Authorized capital increase requires an Ordinary Resolution — a simple majority of shareholders — unless the AOA requires a higher threshold
Form SH-7 must be filed with the ROC within 30 days of passing the shareholders' resolution
The authorized capital increase also requires amendment of Clause V of the MOA — the Capital Clause — reflecting the new amount
Stamp duty is levied on the increase in authorized capital and varies by state — typically between 0.1% and 0.15% of the incremental amount
The company cannot issue shares beyond its authorized capital — any allotment in excess is void and liable to penalties
Late filing of SH-7 attracts additional fees of ₹100 per day — timely filing is essential to avoid accumulation
Authorized capital can be increased any number of times — there is no upper limit on authorized capital under the Companies Act, 2013

Frequently Asked Questions

What is the difference between authorized capital and paid-up capital?

Authorized capital (also called nominal or registered capital) is the maximum amount of share capital a company is permitted to issue, as stated in the Memorandum of Association. Paid-up capital is the portion of issued share capital for which shareholders have actually paid — it cannot exceed the authorized capital. A company may have an authorized capital of ₹1 crore but paid-up capital of only ₹10 lakh, meaning it has room to issue more shares up to the authorized limit without needing a capital increase.

What is the process for increasing authorized capital?

The process involves: (1) Convene a Board Meeting to approve the proposed increase and call an EGM (or pass resolution by postal ballot or circulation where permitted); (2) Issue notice of the EGM with the proposed Ordinary Resolution; (3) Hold the EGM and pass the Ordinary Resolution approving the increase; (4) Amend Clause V of the MOA to reflect the new authorized capital; (5) File Form SH-7 on MCA21 within 30 days with the amended MOA and resolution as attachments; and (6) Pay applicable stamp duty.

Is stamp duty payable on every increase in authorized capital?

Yes. Stamp duty is payable on the increase in authorized capital under the Indian Stamp Act, 1899, and the applicable State Stamp Act. The rate of stamp duty varies from state to state — typically between 0.1% and 0.15% of the incremental authorized capital. Some states like Maharashtra have higher rates. Stamp duty must be paid before or at the time of filing SH-7 on the MCA21 portal, and evidence of payment must be attached.

Can a company reduce its authorized capital?

Yes, a company can reduce its authorized capital by amending the Capital Clause of the MOA, subject to passing the required resolution and filing the amended MOA with the ROC. However, authorized capital reduction is less common and must be distinguished from reduction of paid-up capital (which is a more complex process requiring NCLT approval under Section 66). Authorized capital can generally be reduced by a simple amendment to the MOA without NCLT involvement.

Does increasing authorized capital automatically increase paid-up capital?

No. Increasing authorized capital merely creates the headroom to issue more shares — it does not by itself allot any shares or increase paid-up capital. After the authorized capital is increased, the company must separately pass a Board Resolution for allotment of new shares, collect share application money, allot the shares, issue share certificates, and file Form PAS-3 with the ROC within 15 days of allotment to actually increase the paid-up capital.

Increase Your Authorized Capital — Quickly and Compliantly

Expert assistance with MOA amendment, SH-7 filing, and stamp duty computation for authorized capital increases.