Increase in Authorised Share Capital & Form SH-7 (2026): The 30-Day Deadline, ₹500/Day Penalty & the Wall That Stalls Your Funding Round

Last updated: 15 July 2026 · By CS Sapna Malpani, Practising Company Secretary, Bangalore

On 12 September 2024, the Registrar of Companies in Gujarat signed a penalty order against Steelsmith Continental Manufacturing Private Limited. The charge was narrow: the company had altered its share capital but filed Form SH-7 late. The delay ran to 669 days. The bill came to Rs 3,34,500 on the company and another Rs 1,00,000 on its Managing Director, all under Section 64(2) of the Companies Act, 2013. No fraud, no missing money, no shareholder complaint. A single form, filed late, cost a private company more than Rs 4.3 lakh. If you are about to increase authorised share capital before a funding round, an ESOP allotment, or a bonus issue, this is the form that decides whether the exercise is clean or costly.

Why an increase in authorised share capital is the quiet blocker of funding rounds

Every company registered in India carries two capital numbers. The first is authorised capital, the ceiling written into Clause V of the Memorandum of Association. It is the largest amount of share capital the company is permitted to issue. The second is paid-up capital, the amount actually issued to shareholders and paid up. The gap between the two is your headroom to allot new shares.

Founders rarely think about the ceiling until it stops them. A term sheet is signed, the investor’s money is in escrow, the cap table is modelled to the last decimal, and then the company secretary points out that the new shares would push paid-up capital past the authorised limit. At that point the allotment cannot proceed. Not on a technicality that can be cured later, but as a hard wall: a company cannot allot shares beyond its authorised capital, and any allotment that crosses the ceiling is void to the extent of the excess. The increase under Section 61, and the SH-7 filing that records it, has to happen first.

The same wall appears before an ESOP pool expansion, a bonus issue, a rights issue, or a conversion of loans into equity. In each case the authorised ceiling has to be lifted before a single share moves. Treating SH-7 as a routine afterthought is how a clean cap table event turns into a delayed closing and, if the 30-day clock is missed, a Section 64(2) penalty on top.

Section 64(2): what a late SH-7 actually costs

Section 64(1) of the Companies Act, 2013 requires a company that alters its share capital to give notice to the Registrar in Form SH-7 within 30 days, along with an altered copy of the Memorandum. Section 64(2) supplies the teeth. Where a company fails to comply, the company and every officer in default are liable to a penalty of five hundred rupees for each day the default continues, subject to a maximum of Rs 5 lakh for the company and Rs 1 lakh for each officer in default.

Two things make this provision sharper than it looks. The penalty is a daily one, so it grows every day the form sits unfiled, and it is decriminalised, which means there is no imprisonment and no discretion to argue it down to a warning. The adjudicating officer applies the formula and issues the order. The Steelsmith matter is instructive precisely because it was a suo-motu application: the company itself approached the adjudicating officer under Section 454 to regularise the default, and still walked away with a Rs 4.34 lakh combined penalty. Voluntary disclosure limited the reputational damage; it did not reduce the arithmetic.

What Section 61 lets you do, and what it needs

Section 61(1) of the Companies Act, 2013 lets a limited company with a share capital, if authorised by its Articles, alter its capital clause in a general meeting. An increase in authorised capital falls under Section 61(1)(a). The bar to clear is lower than most founders assume: it needs an ordinary resolution, passed by simple majority, not a special resolution. That single point clears up a great deal of confusion about Form MGT-14, which is covered further below.

The one precondition that trips companies up is the Articles. Section 61 only works “if so authorised by its articles.” Most well-drafted Articles carry an enabling clause allowing the Board to increase authorised capital by ordinary resolution. Some older or barebones Articles do not. If yours are silent, you first alter the Articles by special resolution under Section 14, and only then pass the ordinary resolution to increase capital. Skipping this check is the difference between one filing and two.

The eight-step procedure, done in order

The sequence below is the clean path from decision to a recorded increase. Follow it in order; the order is what keeps the allotment that follows valid.

Step 1. The Articles. Read Clause V and the share-capital article. Confirm the enabling power exists. If it does not, add the AoA amendment (special resolution + MGT-14) to your timeline before anything else.

Step 2. The Board. Convene a Board meeting, approve the proposed new authorised capital, and authorise a director or the company secretary to issue notice of the extraordinary general meeting and to complete the filings.

Step 3. The notice. Send the EGM notice with 21 clear days’ notice to all members, directors, and auditors, together with an explanatory statement. A shorter notice is valid only with consent of members holding at least 95 percent of the paid-up capital.

Step 4. The resolution. At the EGM, members pass an ordinary resolution under Section 61(1)(a) approving the increase. Record it accurately; the SH-7 clock starts on this date.

Step 5. The Memorandum. Alter the capital clause (Clause V) of the Memorandum to show the higher authorised figure. Keep a certified altered copy ready as an SH-7 attachment.

Step 6. The filing. File Form SH-7 within 30 days of the resolution. Attach the altered Memorandum, the certified true copy of the resolution, and the notice with the explanatory statement. Pay the ROC fee (the differential explained below) and the state stamp duty in the same transaction.

Step 7. The approval. Once the Registrar processes SH-7, the increased authorised capital reflects in the company’s master data on the MCA portal.

Step 8. The allotment. Only now do you allot the new shares and file the return of allotment (PAS-3) or the relevant form. Getting the order right keeps the allotment valid.

Stamp duty and ROC fee: what you actually pay

Two charges ride along with SH-7, and founders routinely under-budget one of them.

The ROC filing fee is not a flat number. On an increase, you pay the difference between the fee applicable on the new authorised capital and the fee on the existing authorised capital, computed on the Registrar’s slab rates prevailing on the filing date. A jump from Rs 10 lakh to Rs 1 crore of authorised capital therefore costs the incremental fee on Rs 90 lakh, not a fee on the full Rs 1 crore. Use the authorised-capital fee calculator to compute the exact figure before you file, because the differential varies with your starting point.

Stamp duty is the wild card, because it is a state levy charged on the incremental increase, and rates differ sharply across states. The table below shows how far apart they sit.

The spread matters here: the same Rs 90 lakh increase can cost Rs 500 in Bengaluru and materially more in a percentage-rate state. Because each State Finance Bill can revise the figure, confirm the current rate for your registered office state before filing rather than relying on last year’s number. The MCA portal collects both the fee and the stamp duty electronically when you submit SH-7.

The MGT-14 trap, and three other mistakes that trigger penalties

The single most common error is over-filing or under-filing MGT-14. Here is the clean rule. The ordinary resolution that increases authorised capital under Section 61(1)(a) does not require MGT-14. MGT-14 enters the picture only if you had to amend the Articles first, because that amendment is a special resolution under Section 14, and special resolutions altering the constitutional documents are filed in MGT-14 within 30 days. So a company with enabling Articles files one form (SH-7); a company with silent Articles files two (MGT-14 for the AoA change, then SH-7 for the capital increase).

The second mistake is starting the 30-day count from the wrong date. The clock runs from the members’ resolution, not from the Board meeting that called the EGM. The third is allotting shares before the SH-7 approval reflects in master data, which leaves the excess allotment void and forces an awkward unwind. The fourth is under-paying stamp duty because the team used another state’s rate; the form is then marked for resubmission, and each resubmission cycle eats into the 30-day window, exactly as it did in the Steelsmith matter, where repeated rejections stretched the delay past 600 days.

The deeper implication for 2026

According to CS Sapna Malpani, authorised capital housekeeping has become a timing discipline rather than a paperwork chore, because the cost of getting it wrong now lands as a mechanical daily penalty with no room to negotiate. The decriminalisation of Section 64 removed the threat of prosecution, but it also removed the adjudicating officer’s discretion; the penalty is now arithmetic. For a fast-growing company, the practical lesson is to lift the authorised ceiling one step ahead of need, so the SH-7 is filed in calm conditions rather than in the last 48 hours before a closing.

There is a 2026-specific reason to plan the buffer. After the MCA21 data-centre fire in June 2026, the Ministry extended several deadlines, including DPT-3 and the compliance facilitation scheme, but those reliefs were form-specific and did not stop the SH-7 clock or the Section 64(2) penalty from running. A company that assumed a blanket amnesty and let its SH-7 slip would find the daily penalty accruing regardless. The forward prediction is straightforward: as adjudication orders continue to be published form by form, authorised-capital delays will keep surfacing in the RoC’s monthly penalty lists, because they are easy to detect from a company’s own master data.

SH-7 next to the forms it is confused with

Founders often blur SH-7 with the allotment and resolution filings that surround it. They do different jobs.

Read left to right, the table is also the timeline. If the Articles need changing you file MGT-14 first; you always file SH-7 for the increase; and PAS-3 follows once the higher ceiling lets you allot. For a related trap on the resolution-filing side, see the guide on MGT-14 and board resolutions, and for the allotment side, the note on private placement under Section 42.

Sources and References

• Section 61, Companies Act 2013, Power of limited company to alter its share capital (India Code / ca2013.com)
• Section 64, Companies Act 2013, Notice of alteration of share capital to Registrar; penalty under 64(2) (India Code / ca2013.com)
• RoC Gujarat, Dadra & Nagar Haveli, Adjudication order under Section 454 r/w Section 64(2), Steelsmith Continental Manufacturing Pvt Ltd, dated 12 September 2024 (mca.gov.in / TaxGuru report)
• Rule 15, Companies (Share Capital and Debentures) Rules 2014, Filing of notice of alteration in Form SH-7
• Companies (Registration Offices and Fees) Rules 2014, Fee on increased nominal share capital (differential) and additional fees for delay
• MCA eStamp rate schedule, State-wise stamp duty on alteration of Memorandum (mca.gov.in)

Frequently Asked Questions

What is the time limit to file Form SH-7 after increasing authorised share capital?

Form SH-7 must be filed with the Registrar of Companies within 30 days of passing the ordinary resolution that increases the authorised share capital, under Section 64(1) of the Companies Act 2013. The 30-day clock runs from the resolution date, not from the Board meeting. Miss it and Section 64(2) imposes a penalty of Rs 500 for each day the default continues, up to Rs 5 lakh for the company and Rs 1 lakh for every officer in default, alongside escalating additional ROC filing fees on the form itself.

Do I need a special resolution to increase authorised share capital?

No. An increase under Section 61(1)(a) needs only an ordinary resolution passed by simple majority at a general meeting, provided the Articles authorise the increase. Because it is an ordinary resolution, it does not attract Form MGT-14. A special resolution is needed only when the Articles have no enabling clause, in which case you first amend the Articles under Section 14, and that amendment does require MGT-14 within 30 days.

What is the difference between authorised capital and paid-up capital?

Authorised capital is the ceiling stated in Clause V of the Memorandum: the maximum share capital a company may issue. Paid-up capital is the amount actually issued to and paid by shareholders. A company can never allot shares beyond its authorised ceiling. When a funding round or ESOP allotment would push paid-up capital past the authorised limit, the company must first increase authorised capital via Section 61 and Form SH-7 before it can allot a single new share.

How much stamp duty is payable on an increase in authorised capital?

Stamp duty on an increase is a state subject, charged on the incremental increase rather than the post-increase total. Rates vary widely: Delhi charges 0.15 percent subject to a Rs 25 lakh cap; Karnataka charges a flat Rs 500 on the Memorandum; Maharashtra applies a slab up to Rs 10,000. Because rates change with each State Finance Bill, verify the current rate for your registered office state before filing, as the amount is collected electronically through the MCA portal with the ROC fee.

Can a company allot shares before increasing authorised capital?

No. Any allotment that takes paid-up capital above the authorised ceiling is void to that extent. This is the most common way a fundraise stalls: the term sheet is signed and money is ready, but the cap table needs more shares than the authorised capital permits. The increase under Section 61 and the SH-7 filing must finish first, the Registrar must approve it, and only then can the company pass the allotment resolution and file PAS-3.

What happens if Form SH-7 is filed late?

Two costs stack up. First, additional ROC filing fees accrue on the form, rising from 2.5 percent per month for shorter delays to higher multiples of the normal fee for longer ones. Second, Section 64(2) imposes a separate penalty of Rs 500 per day of continuing default, capped at Rs 5 lakh for the company and Rs 1 lakh per officer in default. In a September 2024 order, RoC Gujarat penalised a company Rs 3,34,500 and its Managing Director Rs 1,00,000 for a 669-day delay in filing SH-7.