What is Maximum Share Capital Allowed for a Company? When you start a company in India, one of the key details you must define is the share capital. This capital represents the total amount of money the company can raise through the issue of shares. However, there is a limit to how much share capital a company can authorize — known as the Maximum Share Capital or Authorized Capital.
Let’s understand what maximum share capital means, how it works, and how you can increase it legally.
🏛️ Meaning of Maximum Share Capital
The Maximum Share Capital refers to the highest amount of share capital a company is legally permitted to issue as per its Memorandum of Association (MOA). This limit is mentioned in Clause V of the MOA.
In simple terms, this is the upper ceiling on the number of shares a company can issue to its shareholders. The company cannot issue shares beyond this limit unless it officially increases its authorized capital by following the proper procedure.
📄 Decided at the Time of Incorporation
Every company must decide its authorized share capital at the time of incorporation. Usually, most private limited companies start with a minimum authorized capital of ₹1 lakh, as required by law.
However, there is no maximum limit defined under the Companies Act, 2013. The company can set any amount as its authorized capital based on its future funding plans and requirements.
That said, the Registrar of Companies (ROC) charges a stamp duty and government fee depending on the total authorized capital. Hence, companies often start with a lower limit and later increase it as the business grows.
⚖️ Procedure to Increase Maximum Share Capital
If your company wants to raise more funds or issue additional shares, it must increase its authorized (maximum) share capital. Here’s how the process works:
1️⃣ Hold a Board Meeting – The Board of Directors must pass a resolution to propose the increase.
2️⃣ Get Shareholder Approval – Conduct an Extraordinary General Meeting (EGM) to approve the increase through an ordinary resolution.
3️⃣ Alter the MOA – Modify Clause V of the Memorandum to reflect the new authorized capital.
4️⃣ File Form SH-7 – Submit this form with the ROC within 30 days of the resolution.
5️⃣ Pay the Fees – Pay the prescribed ROC fees based on the revised capital amount.
Once approved, your company can issue more shares within the new limit.
📊 Example
Suppose your company has an authorized capital of ₹10 lakh and has issued ₹8 lakh worth of shares. If you plan to raise ₹5 lakh more, you must first increase your authorized capital to ₹15 lakh or higher by following the legal process.
This ensures that your company’s share issuance remains fully compliant with the Companies Act, 2013.
✅ Conclusion
In conclusion, the maximum share capital allowed for a company is its authorized capital, and there is no fixed upper limit set by law. However, companies must pay ROC fees according to the amount they declare.
By managing your authorized capital carefully, you can maintain flexibility for future funding while staying compliant with statutory requirements.