The authorized capital of a private limited company decides the maximum number of shares it can have. Most start-ups start out their business with the minimum authorised capital of Rs. 1 lakh but as soon as the business grows, this much capital will not fulfil their requirements. So, there is a need of increase in authorized capital.To increase it, a special resolution will be passed by the board to amend the capital clause of the Memorandum of Association.
To increase the authorised capital and issue new shares to existing promoters, you need to call a board meeting and Form PAS-3 has to be filed with the Registrar of Companies (RoC) to intimate the allotment of shares.
You need to follow avery complicated procedure to issue shares to new shareholders. A detailed valuation report from a chartered accountant will be required in the process.