
How Shares Are Transferred in a Private Limited Company
A share transfer in a private limited company involves more than a simple exchange of ownership.
7 min read
A company can issue shares only up to the authorised capital in its Memorandum. Raise that ceiling first, and the paid-up capital can follow.
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What authorised capital is, why it has to be raised before anything else can be, and why companies choose LegalWiz.in.
Share capital is the part of a company’s capital that is raised by issuing shares. A company may raise capital only up to the authorised capital stated in its Memorandum, and that ceiling can be increased at any time after incorporation on payment of an additional fee and stamp duty.
Because a company can issue shares only up to its authorised capital, that figure determines how many shares it can issue. It is set in the capital clause of the MoA. So to increase the capital-raising capacity, the authorised capital has to go up first. A company that wants to increase its paid-up capital cannot do so until it has room in the ceiling above it.
Altering the authorised capital clause means holding a meeting of the board and a meeting of the members for their respective consents, which is then followed by an application to the MCA.
Your relationship manager and the filing team handle everything below. You supply the documents once and approve the drafts.
Government fees and stamp duty are charged at actuals, and both scale with the authorised capital. The transfer of shares is not included in this package.
The maximum amount of capital a company may raise. This is the figure this service increases.
The part of the authorised capital that has been issued in order to raise capital.
The part of the issued capital that the shareholders have subscribed to pay.
The part of the capital that has been subscribed and actually paid to the company by the shareholders.
Two reasons, and both are consequences of the same ceiling.
A company cannot raise capital beyond the amount prescribed in its Memorandum. So where the need arises to increase the paid-up capital, the authorised capital has to be increased first, and there is no way round it.
An increase in internal funding capacity supports the company’s ability to borrow. The higher the capital, the higher the net worth, and the higher the borrowing capacity that follows from it.
A short checklist. Everything else is drafted for you.
The DSC of one of the authorised directors of the company.
A copy of the latest amended Memorandum and Articles of Association.
The Certificate of Incorporation of the company.
A copy of the PAN card of the company.
Step 01
Step 02
Step 03
Subject to government processing time.
Ten working days end to end. The resolutions and the filing take six; the rest is the Registrar’s.
1 of 10 working days
3 of 10 working days
2 of 10 working days
4 of 10 working days
Subject to government processing time.
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The increase has to receive three consents or approvals:
Within 30 days of obtaining the consent of the shareholders for the increase in share capital.
The resolution passed is notified in MGT-14, and the notice of increase is filed in SH-7 with the altered MoA and AoA.
Yes. The total authorised and paid-up capital is displayed on the master data of the company on the MCA portal.
Yes. The government fee for any e-form filed with the MCA depends on the authorised capital of the company.
So an increase in authorised capital does raise the fee for future online filings, though only to a nominal extent.
Yes, the package cost includes the increase in the paid-up capital of the company.
It does not include the transfer of shares.
Lift the ceiling before you need the room under it.
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