The authorized capital of a Company determines the number of shares a Company can issue to its shareholders. It is a maximum value of securities that a company can legally issue. The number is specified in the memorandum of association (or articles of incorporation in the US) when a company is incorporated, but can be changed or increased later with shareholders' approval.
For Increase in Authorise Share Capital, the company has to make sure that its Articles of Association contain a provision authorising it to increase its authorized share capital. It is mandatory that for increasing the Authorised share capital, authorization in Articles of Association is a pre-condition. In other words Company has to make sure that its Articles of Association contain a provision authorising it to increase its authorised share capital.
- Money to grow the business: With an infusion of cash derived from the sale of stock, the company may grow its business without having to borrow from traditional sources.
- Money for shareholders and others: With more cash in the company offers, additional compensation may be offered to investors, stakeholders, founders and owners, partners, senior management and employees enrolled in stock ownership plans.
- Other benefits of going public: Once the company has gone public, additional equities may be easily sold to raise capital. A publicly-traded company with stock that has performed successfully will usually find it easier to borrow money.