In a government company, with an authorised capital of 10 Cr., Govt. has decided to infuse equity capital of Rs. 22 Cr. to partially wipe out the accumulated losses.
Is it necessary to increase authorised capital?
In any case, this fresh equity is getting consumed, since the accumulated losses are above 40 Cr.
Can the company save on the expenditure involved (It costs several lacs of rupees) in increasing the authorised capital?
Yes, it is necessary to increase authorised capital. You will have to take approval of High Court u/s 100 for writing off share capital against accumulated loss.
Yes, you need to increase the Authorised Capital as the capital can be issued withing the range of Authorised Capital.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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