Increase in Authorised Share Capital: Section 61, Form SH-7, Fees, Stamp Duty & Penalties

Every deadline, on one page

1. Step 0 · before anything else
   Read the Articles of Association
   Section 61 works only "if so authorised by its articles" — no alteration clause means an AOA amendment comes first, by special resolution under Section 14, with its own MGT-14.
2. Corporate machinery
   Board meeting — approve the increase, call the general meeting
   Output: board resolution, draft notice, Section 102 explanatory statement, meeting date.
3. 21 clear days · shorter with consent
   Notice of the EGM (or AGM) issues to members
   If defective, the resolution is exposed to challenge — the cheapest step in the whole exercise to get right.
4. Ordinary resolution — Sec 61(1)(a)
   Members resolve to increase the authorised capital
   A simple majority suffices — a special resolution enters only where the Articles themselves are amended.
5. Within 30 days · ₹500 / day if late
   Form SH-7 filed with the ROC — fee and stamp duty paid
   Section 64(2): ₹500 for each day of default, up to ₹5 lakh on the company and ₹1 lakh on every officer in default.
6. Within 30 days · only if a special resolution was passed
   Form MGT-14 for the AOA amendment
   A separate Section 117 default with its own penalties — the two filings do not cover each other.
7. After SH-7 approval · never before
   The allotment the increase was raised for — ending in Form PAS-3
   Reversed, the allotment exceeds a ceiling that has not legally moved — a defect later filing cannot cure, only disclose.

Introduction

Authorised share capital is the quietest number in a company's constitution — until the week of a funding round, when it becomes the only number that matters. It is the ceiling on how many shares the company may issue, fixed in the capital clause of the Memorandum at incorporation and usually left untouched for years. The moment a fresh issue, a bonus, an ESOP pool or a loan conversion needs more shares than the ceiling allows, the ceiling must move first — through Section 61 of the Companies Act, 2013, an ordinary resolution of the members, and Form SH-7 filed with the Registrar within thirty days.

The increase itself is one of the simpler corporate actions under the Act — which is exactly why it goes wrong. It goes wrong at step zero, when nobody reads the Articles and the resolution is passed without authority. It goes wrong in the middle, when twenty-one clear days of notice are miscounted, or when an investor's consent right in the shareholders' agreement is remembered only after the resolution is passed. And it goes wrong at the end, when the SH-7 waits while the allotment goes ahead — an allotment that breaches a ceiling which, in law, has not yet moved.

The cost of delay here is also unusual. Most ROC forms punish lateness with slab-based additional fees — a few hundred rupees multiplied by two, four or twelve. A late SH-7 instead runs a meter: ₹500 for every day of default under Section 64(2), on the company and, separately, on every officer in default. A month of "next week" costs ₹15,000. A year costs ₹1,82,500 on the company alone — against a filing that takes an afternoon.

And the money is never the worst of it. The sequence of dates — resolution, SH-7, allotment — is the first thing an investor's counsel reconstructs in due diligence. An allotment that predates its SH-7 is not a paperwork slip; it is an issue of shares the company had no capacity to issue, and it follows the company through every subsequent round, demanding disclosure, rectification narratives and specific warranties.

This guide walks the full sequence in the order a company actually lives it: the two capital figures and why only one of them is a ceiling; the events that trigger an increase; the Articles check that decides more timetables than any other step; the board meeting, the notice and the resolution; Form SH-7 with its attachments, fee and stamp-duty arithmetic; the Section 64 penalty meter; the other capital alterations that travel on the same form; and the allotment that follows. The discipline is the same one that runs through every ROC intimation — the fifteen-day clock we describe in our guide to auditor appointment and Form ADT-1 is this filing's closest cousin, and the same date-driven logic governs the trademark opposition timelines on the brand side of the house. Different statutes, one lesson: compliance fails on dates before it fails on merits.

1. Authorised capital and paid-up capital are different things

Every conversation about an increase begins by separating two numbers that founders routinely conflate — and the distinction decides both the paperwork and the timing.

Authorised capital — defined in Section 2(8) — is the maximum amount of share capital the Memorandum permits the company to issue. It is a ceiling, not a promise: a company with ₹1 crore of authorised capital may happily have issued only ₹1 lakh. Nothing obliges it to issue the rest, and the unissued headroom costs nothing to hold once the fees on it are paid.

Paid-up capital — defined in Section 2(64) — is the capital shareholders have actually subscribed and paid. It lives in the register of members and the balance sheet, and it changes only by allotment: a board resolution, receipt of consideration, and a return of allotment on Form PAS-3.

Between the two figures runs the one rule that drives this whole subject: paid-up capital can never exceed authorised capital. The ceiling binds absolutely. When a proposed issue would push the paid-up figure past it, the ceiling must be raised first — and raised on the record, not merely in a resolution sitting in the minute book.

1.1 When the ceiling actually needs to move

An increase is needed whenever a contemplated issue of shares would cross the ceiling. The common triggers, in the order they arrive in practice:

• A priced funding round — the new preference or equity issue would push paid-up capital past the ceiling. This is the classic case, and the one with the least forgiving timetable, because the increase sits on the critical path to closing.
• A bonus issue under Section 63 — capitalising reserves multiplies the share count faster than anything else. A 1:1 bonus doubles paid-up capital overnight; the ceiling must have room for it before the record date.
• An ESOP pool — options are promises of future shares, and those shares must exist inside the ceiling when the options vest and are exercised.
• Conversion of loans or debentures into equity — including conversions the company agreed to years earlier; the ceiling check belongs in the conversion notice timeline, not after it.
• A rights issue under Section 62 larger than the remaining headroom.
• A merger or amalgamation — the transferee company must have capacity to issue the swap shares to the transferor's shareholders on the appointed date; schemes routinely include a clause deeming the transferor's authorised capital to be added to the transferee's, but the fees position needs checking, not assuming.

1.2 Buy headroom once, not annually

ROC fees on capital are slab-based and stamp duty is charged on the increase — but the corporate process costs the same whether you add ₹10 lakh or ₹1 crore of ceiling. The board meeting, the notice, the EGM, the SH-7: none of it doubles because the number did. When a raise is foreseeable, increase to a ceiling that covers the round, the ESOP pool and a sensible margin, in one resolution. Companies that increase by the bare minimum spend the same professional cost again eighteen months later — usually in the week they can least afford the distraction.

2. The statutory framework

Six provisions carry the whole exercise, and reading them once repays the hour many times over.

3. Step zero: read the Articles — and the shareholders' agreement

Section 61 opens with a condition that decides more timetables than any other clause in this exercise: a company may alter its capital "if so authorised by its articles."

Modern Articles built on Table F of Schedule I contain the power as a matter of course. Older companies — and, more dangerously, companies carrying negotiated Articles from a previous investment round — may not, or may subject the power to conditions. If the clause is missing, the Articles must first be amended by special resolution under Section 14, filed on MGT-14 within thirty days under Section 117 — and only then can the increase resolution be validly passed. The practical consequence is a second general meeting, or at minimum a carefully sequenced single meeting passing both resolutions in the right order, with both filings running on their own clocks afterwards.

3.1 The contract sits above the statute

Even where the Articles carry the power, a shareholders' agreement frequently makes any change to the capital structure a reserved matter requiring an investor's prior written consent — and those consent clauses are usually mirrored into the Articles themselves at the closing of the earlier round. A resolution that is perfectly valid under the Act can therefore still be a breach of contract, or void under the company's own entrenched Articles. The sequence is always: read the Articles, read the SHA, obtain the consents in writing, and only then issue the notice. Consent obtained after the resolution is an apology, not a compliance step.

4. The process, step by step

4.1 The board meeting

The Board approves the proposal in principle, fixes the quantum of the increase and the revised wording of the capital clause, approves the notice of the general meeting together with its explanatory statement under Section 102, and fixes the day, date, time and venue of the meeting. The explanatory statement should set out the existing capital, the proposed capital, the reason for the increase, and the text of the resolution — investors and, later, diligence teams read these statements, and a thin one reads as carelessness.

4.2 The notice — twenty-one clear days, counted correctly

Notice of the general meeting issues under Section 101 to every member, director and the auditor, giving not less than twenty-one clear days. "Clear" excludes both the date of despatch and the date of the meeting — a notice emailed on the 1st is good for a meeting on the 23rd, not the 22nd. Where the timetable cannot afford three weeks, shorter notice is available with the prescribed consent of members — for a private company, consent of members holding not less than ninety-five per cent of the voting share capital. In closing-driven increases, the shorter-notice consent is the standard device, gathered alongside the other closing consents.

4.3 The resolution — ordinary, not special

The members pass an ordinary resolution — a simple majority of votes cast — altering the capital clause of the Memorandum. This surprises many: the Memorandum is being amended, yet no special resolution is needed. The increase of authorised capital is one of the few MOA alterations Parliament left to a simple majority, precisely because it changes capacity rather than rights. A special resolution enters the picture only where the Articles themselves are being amended to insert the Section 61 power, or where the company's own Articles impose a higher threshold — which negotiated Articles sometimes do.

4.4 Form SH-7 — within thirty days

Under Section 64, the company gives notice of the alteration to the Registrar within thirty days, on Form SH-7, filed on the MCA V3 portal against the company's CIN and signed with a director's digital signature, with professional certification where required. The attachments:

• Certified copy of the ordinary resolution — and of the special resolution, where the Articles were amended
• The altered Memorandum of Association showing the new capital clause
• The altered Articles, where amended
• The notice of the meeting with the explanatory statement

The portal computes the differential ROC fee — the slab fee on the new authorised capital minus the fee already paid on the old — and collects stamp duty on the increase, a State levy discussed in Section 6. On approval, the company's master data on the MCA portal reflects the new ceiling, and the SRN with its acknowledgement issues to the registered email. File the SRN in the secretarial records: it is the proof of filing, it is quoted in later corrections, and it is the first document a diligence team requests when reconstructing the sequence of dates.

4.5 Then — and only then — the allotment

With the master data showing the new ceiling, the transaction the increase was raised for proceeds on its own statutory track: a rights issue under Section 62(1)(a), a private placement under Section 42 with its offer letter and separate bank account, an ESOP grant under Section 62(1)(b), or a bonus under Section 63 — each ending in a return of allotment on Form PAS-3, after which the paid-up figure rises and must still sit under the new ceiling. The new authorised and paid-up figures then flow into the financial statements and the annual return, where they must reconcile with the Memorandum and the registers. One story, told everywhere.

5. The other alterations that travel on SH-7

Section 61(1) is broader than the increase, and Form SH-7 is the vehicle for the whole family. Knowing the siblings prevents two common errors — using the wrong process for a restructuring, and assuming a Tribunal is needed where it is not.

Section 64 adds two more events to the same thirty-day notice: an alteration of capital by order of the Government, and the redemption of redeemable preference shares — which is why SH-7 appears in redemption checklists even though no Section 61 resolution was passed.

6. Fees, stamp duty, and the arithmetic

Three amounts fund the exercise, and only one of them is negotiable — the professional fee.

6.1 A worked example

A Delhi private company with authorised capital of ₹10 lakh resolves to increase it to ₹1 crore ahead of a priced round — an increase of ₹90 lakh. The SH-7 collects the differential ROC fee computed by the portal on the slab difference, plus Delhi stamp duty at 0.15% of the increase: ₹13,500. Filed within the thirty days, that — plus professional costs — is the whole bill. Filed sixty days late, add ₹30,000 of Section 64(2) accrual on the company, with parallel exposure on each officer in default. The delay costs more than the duty.

6.2 Stamp duty is State law

Stamp duty on the increase is levied under the stamp law applicable to the State of the registered office, and both the rates and the caps differ: the same ₹90 lakh increase is priced differently in Delhi, Maharashtra, Karnataka or Haryana. Two practical consequences follow. First, the duty belongs in the budget before the quantum is fixed — a company choosing between a ₹1 crore and a ₹5 crore ceiling should know what each costs in its State. Second, in a group with companies in several States, the assumption that "we paid X last time" transfers between entities is unsafe.

7. Late filing: the ₹500-a-day meter

Miss the thirty days and Section 64(2) begins to run — and it runs differently from the additional-fee regimes most filers know.

The figures are the exposure on the company alone; every officer in default carries a separate meter capped at ₹1 lakh each — a board of four adds ₹4 lakh of parallel exposure. There is no condonation to apply for and no discretion to petition: the meter is arithmetic, and it stops only at filing or the cap.

7.1 What the delay really costs

The accrued penalty is the visible cost. The invisible one is sequencing: while the SH-7 sits unfiled, the ceiling on the record has not moved — and a company under closing pressure is one impatient decision away from allotting against it. Every month of delay is a month in which the master data, the Memorandum in the minute book, and the term sheet all say different numbers. Diligence teams do not read minute books charitably; they reconstruct the sequence from filing dates, and the question they ask is never "was this eventually fixed" but "what else was run this loosely".

8. Two situations, worked through

9. A closing-week timetable that actually works

Most increases are run against a funding closing, so the sequence is worth writing down as a working timetable rather than a list of rules. Assume a term sheet signed on Day 0 and a target closing inside three weeks.

Days 0–2. Read the Articles and the shareholders' agreement; list every consent the documents require and circulate them for signature. Fix the quantum — round, ESOP pool, margin — and confirm the stamp-duty cost for your State so the number is chosen with its price known. Draft the board resolution, the EGM notice with its explanatory statement, and the shorter-notice consents.

Days 3–5. Hold the board meeting. Issue the EGM notice the same day; gather the shorter-notice consents alongside the other closing consents, so the meeting can be held within the week rather than after twenty-one clear days.

Days 6–9. Hold the EGM; pass the ordinary resolution (and any special resolution, in the right order); sign the minutes; update the Memorandum text. Prepare the SH-7 the same day — every attachment already exists — and check the signing director's DSC is valid before the filing session, not during it.

Days 10–12. File SH-7 with the differential fee and stamp duty; file MGT-14 in parallel where triggered; diarise both SRNs. Verify the master data reflects the new ceiling.

Days 13 onwards. Only now run the allotment: the offer documents, the money into the right account, the board allotment resolution, and PAS-3 on its own clock. The closing checklist should state the dependency in terms: no allotment until the SH-7 SRN issues. Written that way, the one mistake that cannot be repaired later becomes impossible to make by accident.

8.1 A note for foreign-owned subsidiaries

Where the company is a subsidiary of a foreign parent, two frictions predictably eat the timetable. First, consents and signatures cross time zones: the shorter-notice consent, the parent's own internal approvals, and the DSC of a non-resident director all take days that a domestic company would not lose — start them on Day 0, not Day 6. Second, the capital increase usually precedes an inbound remittance, so the FEMA layer runs alongside the Companies Act layer: the pricing, the reporting of the allotment, and the banking channel each have their own requirements and their own clocks. The Companies Act sequence in this guide clears the runway; the exchange-control sequence lands the plane, and the two teams should be working from one combined checklist rather than two separate ones.

10. Twelve mistakes

• Passing the resolution without checking the Articles for the Section 61 authorisation.
• Ignoring investor consent rights in the SHA and the Articles — a valid resolution can still be a contractual breach.
• Miscounting the 21 clear days' notice, or issuing a notice without the Section 102 explanatory statement.
• Treating the increase as needing a special resolution — an ordinary resolution suffices unless the Articles are being amended or demand more.
• Allotting shares before the SH-7 lands — the allotment exceeds a ceiling that has not legally moved.
• Forgetting that the Section 64 default is a ₹500-per-day meter on the company and each officer, not a slab multiplier.
• Filing SH-7 but missing the parallel MGT-14 where a special resolution was passed.
• Budgeting the ROC fee but not the State stamp duty on the increase — and assuming last year's figure from a sister company in another State.
• Increasing by the bare minimum, then repeating the whole exercise at the next round — buy headroom once.
• Using Section 61(1)(e) cancellation where Section 66 reduction was meant, or vice versa — one is a notice, the other a Tribunal-supervised process.
• Missing that a consolidation changing voting percentages needs Tribunal approval under the proviso to Section 61(1)(b).
• Not carrying the new figures through — the MOA copies, the statutory registers, the share certificates on sub-division, and the next annual return must all tell the same story.

11. Checklist

12. Frequently asked questions

Corporate — related reading

• Company incorporation in Indiawhere the first capital clause — and its headroom — is set
• Share allotment and Form PAS-3the filing that follows every increase — rights, private placement and bonus routes
• Auditor appointment and Form ADT-1the fifteen-day cousin of this thirty-day clock
• Annual filings: AOC-4 and MGT-7where the new capital figures must reconcile every year
• Drafting and vetting of agreementsSHA consent rights, term sheets and the reserved-matters list
• Trademark opposition in Indiaa different statute, the same lesson — compliance fails on dates before it fails on merits

Talk to us before the thirty days run

Delhi Legal Company handles capital alterations end to end for Indian companies and foreign-owned subsidiaries — the Articles check and any Section 14 amendment, SHA consent sequencing, board and general-meeting documentation, SH-7 and MGT-14 filings with fee and stamp-duty computation, sub-divisions and consolidations, and the allotment that follows on PAS-3 — sequenced so the ceiling always moves before the shares do.

How we usually start. Send us the current MOA and AOA, the target capital, and the State of your registered office. We come back with the exact fee and stamp duty, whether your Articles carry the power and what consents your documents require, a meeting timetable that fits your closing date, and the filing sequence that keeps the record clean.

Start the conversation