Form SH-7: Notice of Alteration of Share Capital

What SH-7 is used for

Section 61 lets a company with share capital alter its capital clause if its articles allow it. The most common use is increasing authorised capital, the ceiling up to which shares can be issued, before a fundraise or ESOP pool. Section 64 requires notice to the Registrar within 30 days of the alteration in Form SH-7.

• Increase in authorised share capital
• Consolidation or sub-division of shares
• Conversion of fully paid shares into stock or back
• Cancellation of shares not taken up
• Redemption of redeemable preference shares
• Increase in number of members for companies without share capital

Approvals before filing

Increasing authorised capital needs an ordinary resolution of members if the articles permit, after a board meeting approves the proposal and calls the general meeting. The capital clause of the memorandum is altered. If the articles also need to change, a special resolution is passed and MGT-14 is filed within 30 days as well.

Attach the resolution, the altered memorandum and, where relevant, the altered articles. The SH-7 form captures existing and revised capital, the class of shares and the date of the meeting. For sub-division or consolidation, it records the old and new face value and number of shares.

How the fee is worked out

The fee for an increase is the difference between the fee payable on the new authorised capital and the fee on the existing capital, at the rates in the Companies (Registration Offices and Fees) Rules, 2014. The portal calculates it. For companies other than OPCs and small companies, the slab rates are below, with total fees capped at ₹2.5 crore. Stamp duty on the increase is payable separately under state law.

For other alterations that do not increase capital, such as sub-division or consolidation, only the document filing fee of ₹200 to ₹600 applies, based on nominal capital. Stamp duty is generally linked to an increase, so check state rules for other changes.

Late fee and penalty

SH-7 for an increase in nominal capital does not use the 2x to 12x multiples. Instead, the additional fee is 2.5% per month of the capital fee for delays up to six months, and 3% per month beyond six months. On a large increase this adds up quickly.

Section 64(2) provides that if a company and its officers default, each is liable to a penalty of ₹500 for every day the default continues, subject to a maximum of ₹5 lakh for the company and ₹1 lakh for each officer in default.

Common mistakes

Errors include allotting shares beyond the old authorised capital before SH-7 is approved, entering the existing capital incorrectly, attaching an MoA that still shows the old capital, and overlooking state stamp duty. Founders sometimes increase capital far beyond near-term needs, paying fees and stamp duty they did not need to. Increase in authorised capital should precede any PAS-3 for allotment beyond the old limit. Refogo's partner professionals can handle the increase and SH-7 filing for a fixed fee.

Step by step

1. 1Check the articles

   Confirm the articles permit alteration of capital.

2. 2Board meeting

   Approve the proposal and call a general meeting.

3. 3Pass resolution

   Members pass an ordinary resolution, or special resolution if articles change.

4. 4Prepare altered MoA

   Update the capital clause.

5. 5File SH-7

   Attach resolution and altered MoA; pay capital fee and stamp duty.

6. 6File MGT-14 if needed

   Where a special resolution was passed, file it within 30 days.