Increase / Change in Share Capital: What It Actually Involves
Every time a company grows its capital base — to bring in a new investor, reward founders with more shares, or simply create headroom for a future round — it is changing its share capital. That single phrase covers at least five legally distinct actions under the Companies Act 2013: increasing authorised capital, altering (sub-dividing or consolidating) the face value of existing shares, converting share classes, issuing rights shares to existing members, and reclassifying unissued capital. Each has its own resolution requirement, its own MCA form, its own stamp duty exposure, and its own failure mode if the Articles of Association or the special resolution wording is wrong.
Understanding the Service
A change in share capital refers to any alteration to a company's capital structure as recorded in its Memorandum of Association (MoA) and Register of Members — most commonly an increase in authorised share capital (the maximum value of shares the company is legally permitted to issue), but the phrase also covers sub-division of shares (splitting a higher face-value share into multiple lower face-value shares), consolidation of shares (the reverse — combining several low face-value shares into fewer higher face-value shares), conversion of shares from one class to another, and a rights issue (offering new shares to existing shareholders in proportion to their current holding, under Section 62(1)(a) of the Companies Act 2013). Increasing authorised capital is governed by Section 61 read with Section 13 of the Companies Act 2013 — it requires the Articles of Association to permit it (or be amended to permit it), a special resolution passed by shareholders, and Form SH-7 filed with the Registrar of Companies (RoC) within 30 days of the resolution, along with the applicable RoC filing fee and state stamp duty on the incremental authorised capital.
Authorised capital is not the same as paid-up capital.
For the full scope, current process and what PNPC includes, see the dedicated Increase / Change in Share Capital service page.
When You'd Need This
- Authorised capital is close to or below what a planned investor round would require in paid-up capital — increase it ahead of the term sheet, not after
- Company was incorporated with a low authorised capital ceiling (a common outcome of minimising incorporation stamp duty) and now needs headroom for growth
- ESOP pool is being carved out and the board wants a lower face value per share to make individual employee grants administratively cleaner
- Existing shareholders want to inject additional capital into the company without diluting the current ownership ratio — a rights issue preserves proportional holding
What This Doesn't Cover
- Bringing in a new external investor who is not an existing shareholder — this is a fresh allotment under Section 62(1)(c) (preferential allotment) or a private placement under Section 42, not a rights issue
- Transferring existing shares from one shareholder to another — this is a share transfer on Form SH-4, not a capital change; the authorised or paid-up capital does not change at all
- Buying back shares from existing shareholders to reduce capital — this is a buy-back under Section 68, a distinct and more heavily regulated process with its own conditions and timelines
Common Questions
What is the difference between authorised capital and paid-up capital, and why does it matter for a capital change?
Authorised capital is the maximum value of shares the company's Memorandum of Association permits it to issue — the ceiling. Paid-up capital is the actual value of shares issued and subscribed by shareholders at any given time — always less than or equal to authorised capital. A capital change most commonly means increasing this ceiling (via Form SH-7) so that the company can then issue more shares (via Form PAS-3) without exceeding the limit set in its MoA.
How do we increase the authorised share capital of our company?
Increasing authorised capital requires that the Articles of Association permit it (or be amended to permit it), a special resolution passed by shareholders under Section 61 read with Section 13 of the Companies Act 2013, and Form SH-7 filed with the Registrar of Companies within 30 days of the resolution, along with the applicable RoC fee (computed on the incremental capital) and state stamp duty.
What is Form SH-7 and when must it be filed?
Form SH-7 is the MCA e-form used to notify the Registrar of Companies of any alteration to a company's share capital — including an increase in authorised capital, a sub-division, or a consolidation of shares. It must be filed within 30 days of the resolution (or the meeting at which it was passed) authorising the change, along with a certified copy of the resolution and the altered Memorandum of Association.
Where PNPC Fits In
A share capital change done right takes a few weeks of careful sequencing. Done wrong, it becomes the exact defect an investor's legal team flags during due diligence — talk to a PNPC CA before you draft the resolution, not after MCA raises a query.
PNPC Global has advised Chennai, Bangalore and Hyderabad businesses since 1986. Explore the full Corporate Law practice for related services, or go straight to the Increase / Change in Share Capital page for specifics.
Rates, thresholds and filing dates are set by the relevant authority and revised periodically. Treat anything numeric here as "ask PNPC for the current figure," not as a quoted fact.