Each business needs more funds over time to run business. These funds can be required on a long- and short-term basis. A short-term need can be satisfied by taking loans and advances. But for the run, the company will require more funds. For a Private Limited Company, this can be done by increasing the authorized capital of the company. Since the private limited company is governed and regulated under the Company Act to make changes in the structure it is necessary to follow the Act and the rules stated.
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What is Authorized Capital?
Authorized Capital, also known as Nominal Capital or Registered Capital, refers to the maximum amount of capital that a company is authorized to issue to its shareholders. It represents the upper limit of funds that a company can raise through the issuance of shares. The Authorized Capital is mentioned in the Memorandum of Association (MoA) of a company during its incorporation.
Reasons for Changing Authorized Capital:
Procedure for Changing Authorized Capital: Changing the authorized capital involves certain procedures and compliance with regulatory authorities. Here are the general steps:
Conclusion:
Changing the authorized capital is a strategic move that requires careful consideration of the company’s financial needs and future plans. It is crucial to follow the legal procedures and obtain the necessary approvals to ensure compliance with regulatory requirements. Companies should assess their capital requirements and make changes judiciously to support their growth and financial objectives.
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