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Advantage of increasing Authorized capital

murphy (CA) (30 Points)

28 February 2008

What are the advantages of increase authorized capital?

Eg: If a pvt ltd company has a capital of 15 lakhs and wants to increase it to 1 crore, will it have any advantages?

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3 Replies

CA. Kirti S. Ganatra (Service) (1461 Points)
Replied 28 February 2008

Firstly there are charges/fee to be paid. for exp. if you have auth capital of 15 lakh and you have to increase it you will have to pay additional charges. Similarly if in future you want to increase your capital you need not waste your time to increase your authorised capital

O.D.SHARMA (DGM-F & A) (1734 Points)
Replied 28 February 2008

if u have authorised capital,u can increase the capital of promotors/issue shares.

CA Chaitanya (PRACTISING CA) (4283 Points)
Replied 28 February 2008

Banks prefer to give loan dependiong on the authorised capital. The ideal debt equity ratio is 2:1. So if you increase the authorised capital, you will get the loans in the above proportion. But you need to incur certain costs at the ROC for increasing the share capital.