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Know about an increase in Authorised Share Capital
The share capital is a component of a company’s capital which is raised through the issue of shares. a corporation may raise capital only to the extent of the authorized capital mentioned within the company. to extend the capital raising capacity, the authorized capital also can be increased any time after incorporation by payment of additional fee and stamp tax.
A company can issues shares only to the extent of authorized capital. Hence, it determines the number of shares a corporation can issue which is mentioned within the Capital Clause of MoA. so as to extend capital raising capacity, it’s to extend the authorized capital first. to change authorized capital clause, the corporate got to conduct a gathering of Board and Member that’s followed by application to MCA.
Benefits of increasing authorized capital
- Allow further issue of capital: As said, the corporate cannot raise capital beyond the quantity prescribed within the MoA. Therefore, if the necessity arises to extend the paid-up capital, first authorized capital must be increased.
- Increase in borrowing capacity: Increase in internal funding capacity supports the borrowing capacity of the corporate. Higher the capital, higher internet worth than the borrowing capacity.