Increase in Authorised Share Capital — Form SH-7 Filing
Authorised share capital is the ceiling written into the capital clause of your Memorandum of Association. It is the maximum value of shares the company is permitted to issue. It is not money the company holds, and it is not what shareholders have paid — it is simply headroom, and once you have used it up you cannot allot another share until the ceiling is raised.
Raising it is a shareholder decision. Section 61(1)(a) of the Companies Act, 2013 allows a company with share capital, if its articles permit, to increase the authorised capital by ordinary resolution at a general meeting. The company then gives notice to the Registrar in Form SH-7 within 30 days under Section 64(1), with the altered memorandum, the differential MCA fee and state stamp duty paid electronically.
This guide covers what authorised capital actually is and how it differs from paid-up capital, when you need to increase it, the ordinary-versus-special resolution question that decides whether MGT-14 is required, the step-by-step process, how the differential fee and stamp duty are computed, the Section 64(2) penalty for late filing, and why an increase is not the same thing as issuing shares.
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What is authorised share capital?
Authorised capital is the amount stated in Clause V of the memorandum as the capital with which the company is registered, divided into shares of a fixed face value. A company with ₹10,00,000 authorised capital divided into 1,00,000 equity shares of ₹10 each may issue up to one lakh shares and no more.
There is no statutory minimum authorised capital for a private limited company or an OPC, so founders choose the figure at incorporation. The figure matters because MCA registration fees are computed on it and because a later increase costs the differential fee plus stamp duty — which is why setting it slightly above your near-term plan is usually cheaper than raising it twice.
Authorised capital is a permission, not an asset. A company can carry ₹1 crore of authorised capital with ₹1 lakh actually paid in. Nothing about the higher ceiling improves the balance sheet, the creditworthiness or the net worth of the company.
How is authorised capital different from paid-up capital?
| Term | What it means | Where it changes |
|---|---|---|
| Authorised capital | The ceiling in the memorandum — the maximum the company may issue | Ordinary resolution under Section 61, notified in SH-7 |
| Issued capital | The part of the authorised capital actually offered to shareholders | On each allotment of shares |
| Subscribed capital | The part of the issued capital that shareholders have agreed to take | On each allotment |
| Called-up capital | The part of the subscribed value the company has asked shareholders to pay | On a call by the board |
| Paid-up capital | The part actually received by the company | On receipt of money, reported in PAS-3 |
Almost every regulatory threshold you care about is measured on paid-up capital, not authorised capital — the small-company definition, the demat mandate, MGT-8 certification on the annual return, and several audit and governance triggers. Raising authorised capital does not move you across any of those lines. Allotting shares does.
One exception is worth knowing: MCA filing fees on most forms are slabbed by nominal share capital, so a large authorised capital raises the ordinary fee on routine filings for the rest of the company’s life.
When does a company need to increase authorised capital?
- A funding round where the new shares to be allotted would exceed the existing ceiling
- Creating or expanding an ESOP pool that needs shares reserved beyond the current headroom
- A bonus issue, which converts reserves into share capital and consumes headroom quickly
- A rights issue to existing shareholders that takes issued capital past the ceiling
- Conversion of convertible instruments — notes, CCPS or CCDs — into equity on a trigger event
- Converting a director or shareholder loan into equity
- A lender, tender authority or counterparty that requires a stated minimum capital structure
- An Indian subsidiary receiving a fresh tranche of capital from its foreign parent
The test is arithmetic: add the shares you intend to allot to the shares already issued, multiply by the face value, and compare that to the authorised capital in your memorandum. If the total exceeds the ceiling, the increase has to be completed before the allotment — not alongside it and not afterwards.
This is the single most common timing failure in a funding round. Term sheets move faster than general meetings, and a board that has already received subscription money cannot allot against a ceiling it has exhausted.
Is an ordinary or special resolution needed to increase authorised capital?
An ordinary resolution — a simple majority of members present and voting — is enough, provided the articles authorise the company to alter its capital clause. Section 61(1)(a) treats a capital increase as ordinary business, not a constitutional change, which surprises founders who assume anything touching the memorandum needs 75 per cent.
The fork appears when the articles are silent, or contain their own capital ceiling. The articles are a separate document from the memorandum, and altering them always needs a special resolution under Section 14. So the sequence depends entirely on what your articles say.
| Position in the articles | Resolutions needed | Forms to file |
|---|---|---|
| Articles expressly permit alteration of capital | Ordinary resolution under Section 61(1)(a) | SH-7 within 30 days |
| Articles silent, or contain their own capital ceiling | Special resolution under Section 14 to alter the articles, then ordinary resolution under Section 61(1)(a) | MGT-14 within 30 days, then SH-7 within 30 days |
| Articles require a special resolution for capital changes | Special resolution as the articles require | MGT-14 where Section 117(3) applies, then SH-7 |
Over-filing and under-filing MGT-14 are both common errors. An ordinary resolution under Section 61 does not fall within the Section 117(3) list, so filing MGT-14 for it is unnecessary. But where the articles had to be amended first, skipping MGT-14 leaves that amendment unregistered — see AOA amendment. Read the articles before the board meeting is called.
How to increase authorised share capital step by step?
- 1.Read the articles to confirm whether they permit alteration of the capital clause
- 2.Compute the new ceiling you need, allowing headroom for the ESOP pool and the next round
- 3.Issue the board meeting notice and hold the board meeting to approve the proposal and call a general meeting
- 4.Issue the general meeting notice with 21 clear days’ notice and the explanatory statement under Section 102
- 5.Where shorter notice is needed, obtain consent from members holding at least 95 per cent of the voting rights
- 6.Hold the general meeting and pass the resolution — special resolution first if the articles must be altered, then the ordinary resolution for the increase
- 7.File MGT-14 within 30 days where a special resolution altering the articles was passed
- 8.Complete the altered capital clause of the memorandum in the SH-7 data entry
- 9.File SH-7 within 30 days of the resolution, paying the differential MCA fee and the state stamp duty electronically
- 10.Update the memorandum and articles in every copy held by the company
- 11.Update the statutory registers and the capital structure in your records
- 12.Only then proceed to the allotment itself and file PAS-3 within the prescribed window
With full notice the process runs roughly three to four weeks from board meeting to general meeting, plus the filing. Where all members consent to shorter notice it compresses to a matter of days — which is why the 95 per cent consent route is worth knowing when a round is closing.
What documents are required for SH-7 filing?
- Certified true copy of the resolution increasing the authorised capital
- Copy of the general meeting notice with the explanatory statement
- Certified copy of the altered memorandum showing the revised capital clause
- Altered articles where the articles were amended as part of the exercise
- Minutes of the general meeting
- Shorter notice consent from members where the meeting was held on shorter notice
- SRN of the MGT-14 filing where the articles were altered by special resolution
- DSC of the authorised director or company secretary
In the current webform the altered capital clause is captured through the integrated electronic memorandum data entry rather than as a scanned document, so the values you type become the record. Check the share classes, face value and totals against the resolution before submitting — a mismatch between the resolution and the form is a resubmission.
How much does it cost to increase authorised capital?
Two government charges apply, and the first one is not a flat fee. The MCA fee payable on an increase is the difference between the registration fee applicable on the revised authorised capital and the fee applicable on the existing authorised capital, at the rates prevailing on the date of filing. Where that difference works out to zero, the ordinary slab filing fee applies instead.
| Cost head | Basis | Indicative position |
|---|---|---|
| MCA fee on the increase | Differential between fee on revised and on existing authorised capital | Rises steeply with the size of the increase; slab rates step down as capital grows |
| Overall cap on MOA registration fee | Statutory ceiling in the fee rules | Restricted to ₹2,50,00,000 where the computed fee would exceed it |
| Ordinary slab fee where the differential is nil | Slabbed by nominal capital | Roughly ₹200 to ₹600 across the slabs |
| Stamp duty on the increase | State law, paid electronically through the MCA portal on SH-7 | Varies sharply by state — commonly a percentage of the increase with a floor and a cap |
| Additional fee if SH-7 is filed late | Multiple of the normal fee, rising with delay | Up to 12 times the normal fee at the longest slab |
| Professional fees | Drafting, meeting papers, filings | Scoped after a short discovery call |
These figures are indicative. The fee slabs in the Companies (Registration Offices and Fees) Rules and the state stamp schedules are amended from time to time, and OPCs and small companies have their own fee treatment on the existing-capital side of the calculation. Stamp duty for the same increase can differ by a large multiple between two states, so we compute your exact number from your registered-office state and current capital before filing rather than quoting a generic figure.
One structural point worth planning around: because the fee is charged on the differential each time, two increases of ₹25 lakh cost more in aggregate paperwork and duty than a single increase of ₹50 lakh. If you can see the next round coming, ask for the headroom once.
What is the time limit for filing SH-7?
Within 30 days of the alteration — that is, 30 days from the date the resolution is passed at the general meeting, not from the board meeting that proposed it and not from the date the money arrives. Section 64(1) also requires the altered memorandum to accompany the notice.
Where MGT-14 is also required because the articles were altered, it is due within 30 days of the special resolution and is normally filed before SH-7, because the SH-7 filing may ask for its SRN. Two clocks running from the same meeting is a common way to lose one of them.
What is the penalty for not filing SH-7 on time?
Section 64(2) provides that where a company fails to comply with the notice requirement, the company and every officer in default are liable to a daily penalty for each day the default continues, subject to prescribed maximums. The figure most commonly cited is ₹500 per day, capped at ₹5,00,000 for the company and ₹1,00,000 for each officer in default, and some commentary quotes a higher daily amount — confirm the current text before assuming your exposure.
- A daily penalty on the company under Section 64(2), subject to a prescribed cap
- A separate daily penalty on each officer in default, subject to a lower cap
- An additional filing fee on SH-7 itself, as a rising multiple of the normal fee
- A memorandum on the public record that does not match the capital the company believes it has
- Allotments made against unregistered headroom, which is exactly the defect diligence looks for
The last point is the practical risk. A company that allotted shares on the strength of a resolution it never notified has a capital structure that the MCA record does not support, and unwinding that in the middle of an acquisition is expensive.
How is increasing authorised capital different from issuing shares?
They are two different events and each needs its own approvals and its own filing. Increasing authorised capital raises the ceiling and changes nothing about who owns the company. Issuing shares — an allotment — uses up that ceiling, brings money in, and changes the shareholding.
| Increase in authorised capital | Allotment of shares | |
|---|---|---|
| What changes | The ceiling in the memorandum | Who owns the company and how much is paid up |
| Provision | Section 61 read with Section 64 | Section 42 for private placement, Section 62 for further issue |
| Approval | Ordinary resolution of members | Board resolution, plus special resolution for a private placement |
| Valuation | Not required | Registered valuer report generally required where shares are issued above face value |
| Form | SH-7 within 30 days of the resolution | PAS-3 return of allotment within the prescribed window |
| Money | No money comes into the company | Subscription money is received into a separate bank account |
| Effect on shareholding | None | Dilutes existing shareholders |
A share transfer is a third and quite separate thing: existing shares moving from one holder to another, with no new shares created, no change in paid-up capital, and no MCA allotment filing at all. Founders often say "issue shares to the new partner" when they mean a transfer, and the two routes have very different tax, stamp duty and filing consequences.
What other changes to share capital does SH-7 cover?
SH-7 is the notice for alterations of share capital generally, not only increases. Section 61 also permits consolidation and division of shares, conversion of fully paid shares into stock and back, sub-division of shares into smaller denominations, and cancellation of shares that have not been taken up.
- 1.Increase in authorised capital — ordinary resolution, the most common use of the form
- 2.Sub-division of shares into a lower face value, which changes the share count but not the total capital
- 3.Consolidation of shares into a higher face value
- 4.Conversion of fully paid-up shares into stock, or reconversion
- 5.Cancellation of unissued shares, which reduces authorised capital without being a reduction of capital
- 6.Increase in the number of members, for a company without share capital
Two limits are worth flagging. A consolidation or division that changes the voting percentage of a class of shareholders needs Tribunal approval under the proviso to Section 61(1)(b). And a genuine reduction of paid-up capital is not a Section 61 matter at all — it runs through Section 66 with NCLT confirmation and creditor notice, which is a different order of exercise.
What should be done after the increase is registered?
- 1.Replace the capital clause in every printed and digital copy of the memorandum
- 2.Circulate the updated memorandum and articles to the board and to shareholders who hold copies
- 3.Reflect the revised authorised capital in the next annual return and in the notes to the financial statements
- 4.Proceed with the allotment: offer letter or private placement offer, valuation where required, separate bank account for subscription money, board allotment resolution
- 5.File PAS-3 within the prescribed window and issue share certificates with stamp duty
- 6.Update the register of members and the register of share transfers
- 7.Complete FDI reporting to RBI where any allottee is non-resident
- 8.Check whether the higher paid-up capital pulls the company across any threshold — small-company status, the demat mandate, or annual return certification
That last item is the one that catches growing companies. The increase itself changes no threshold, but the allotment that follows it can move the company out of small-company status and into a materially heavier compliance set from the end of that financial year.
What are the common reasons SH-7 gets rejected or resubmitted?
- Articles did not permit alteration of capital and no special resolution was passed to amend them
- MGT-14 not filed, or filed after SH-7, where the articles were altered
- Capital figures in the form do not reconcile with the resolution or with the existing authorised capital on record
- Share classes or face value entered inconsistently with the memorandum
- Explanatory statement under Section 102 missing from the notice attachment
- Shorter notice used without evidence of the 95 per cent member consent
- Stamp duty computed on the wrong state, or on the increase rather than on the basis the state prescribes
- Form filed beyond 30 days without the additional fee tendered
Every one of these is caught by a pre-filing check against the current MCA master data for your company. Pull the existing authorised capital from the record rather than from your own files — the two disagree more often than you would expect, usually because an earlier increase was resolved but never filed.
What is changing in share capital filings?
SH-7 now runs as an MCA V3 webform with integrated electronic memorandum data entry and mandatory electronic payment of stamp duty through the portal for all states that have adopted e-stamping. That removed the old practice of attaching a physically stamped memorandum, and it means the portal computes duty from your registered-office state and capital figures.
MCA’s draft Companies (Incorporation) Amendment Rules, 2026, published for public consultation, propose consolidating a set of legacy incorporation, change and conversion forms into two comprehensive filings. SH-7 sits under the Share Capital and Debentures Rules and is not in that consolidation list, so an authorised capital increase continues on the existing form. A separate MCA consultation on rationalising the wider filing framework across the corporate lifecycle is also open at concept-note stage. Neither is notified law.
Why choose Arjun Filings for authorized capital?
Arjun Filings runs authorized capital as a checklist-first engagement: a qualified CA or CS scopes the work, tells you exactly which documents are needed, and reviews every form before it is signed and submitted. You get a named specialist, a status update at each stage, and a compliance calendar for whatever comes next.
- Specialist support for authorized capital
- Due-date calendar and penalty awareness
- Form review before DSC signing
- Status updates until acknowledgement