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The share capital is part of company’s capital which is raised through issue of shares.
The concerned authority for approving the increase in authorised capital is the Registrar of Companies (RoC) under the Ministry of Corporate Affairs.
In terms of the legal dimension, the Companies Act, 2013 in India governs the provisions related to the authorised capital of companies. The Act provides guidelines and regulations for altering the capital clause, including the procedures and requirements that need to be followed.
The key objective of increasing the authorised capital is to provide the company with the flexibility to raise additional funds whenever required.
In some cases, an increase in authorised capital may be necessary to comply with legal requirements or to meet the minimum capital thresholds specified for certain business activities or licenses. By fulfilling these requirements, the company ensures legal compliance and avoids any potential penalties or issues in the future.
A company with a higher authorised capital may be viewed as more established and financially robust. It can enhance the company's credibility among stakeholders, including customers, suppliers, investors, and lenders. This can contribute to a positive brand image and facilitate business relationships.
By increasing the authorised capital, a company expands its financial capacity, allowing it to raise additional funds through the issuance of shares. This provides the company with a greater ability to undertake new projects, expand its operations, and meet its financial requirements.
Increasing the authorised capital allows for greater flexibility in the company's capital structure. It enables the company to issue additional shares when needed, whether for equity financing, employee stock options, or other purposes. This flexibility helps in adapting to changing financial requirements and market conditions.
The increase in capital shall receive following consent or approval:
1. Consent from the Board;
2. Consent from the members of the company; and
3. Approval from concerned RoC.
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