In the scenario of uncertain cash flow, which is undeniably the most common limitation of many new companies, Equity increase plays a significant role. Increase in equity raises money for the start-up companies and growing businesses. The share capital of a company can be increased by issuing new shares. The best part about equity increase or equity financing is that there is no fixed obligation to pay dividends. Apart from this, it allows the company to share risks and liabilities of company ownership with the new investors. Equity Increase further allows the company to grow or diversify into other areas.
Benefits of Equity Shares
- The capital of the business can be used for business activities.
- Paying fixed rate of dividend on Equity Shares is not important.
- Assets of the company are not charged while issuing equity shares.
- Increase in outside investors as they expect the business to deliver value.
- Venture capitalists assist the business with their contacts and experience.
- Great scope for profitability as investors have a vested interest in the business.
Equity is increased in order to raise more capital for the company. Increase in equity is a blessing for any business as it finances the pending projects of the business. Moreover, in depressed market situation, equity increase proves to be very beneficial.
An increase is an equity should be done as per the needs of the business. In case, a company doesn’t need any capital, it’s good to refrain from raising equity as it’s not a sound decision from company’s perspective. On the other side, if the company is unable to raise the capital at the time of need, it can be bad for its functioning.
Foreign entities are one of the main sources of equity increase. These entities also want to invest in India for its vast resources and growth. Providing more tax benefit to the foreign entities can be effective in increasing equity. Government is also making investing norms easier.
Our Services for Equity Increase
Increased Authorised Capital
Increase in the authorized capital is governed by section 61 read with section 13 and 14 of the Companies Act, 2013. As soon as the company gets incorporated, the authorized capital of the company can be increased anytime. Authorised Capital implies the maximum value of securities that a company can lawfully issue. Read More
Transfer of Shares
As there are some statutory provisions that need to be followed, Section 56 of Companies Act, 2013 Rule 11 of Companies (Rules 2014) and provisions given in the model articles of association given in Table ‘F’ of Schedule-I are the best sources to be referred while the transfer of shares.
Allotment of Shares
Allotment of shares refers to the distribution of shares among the applicants of the shares of a particular company. Before the allotment of shares by the board, statutory conditions need to be fulfilled. Moreover, provisions in the Memorandum of Association and the Articles of Association are taken into account.