Issue of Share Capital
Issue new shares to raise capital the right way, from the board and shareholder resolutions through to allotment and your PAS-3 filing.
Issuing share capital is how a company raises money by giving investors new shares in exchange for their funds. A company does it to bring in growth capital, onboard an investor, reward employees, or restructure its ownership. There are several routes, from a rights issue to existing shareholders to a private placement with a select group of investors, and each follows its own process under the Companies Act, 2013. Getting the route, the resolutions, and the ROC forms right is what keeps the issue clean and the money usable. AMpuesto handles the whole issue for you, from the board and shareholder resolutions through to allotment and your PAS-3 filing.
Documents required
- Certificate of Incorporation, MOA, and AOA
- Latest audited financial statements
- Valuation report from a registered valuer, where the route needs one
- Details of the proposed allottees, with PAN and contact details
- Board and shareholder approval for the issue
- Digital Signature Certificate of a director
What you will get
- Board and shareholder resolutions drafted for the issue
- The private placement offer letter in Form PAS-4, where it applies
- Form MGT-14 filed for the special resolution
- Form PAS-3 filed as the return of allotment
- Share certificates in Form SH-1 issued to the allottees
- A CA available for questions through the process
What is the issue of share capital?
The share capital of a company is the money it raises by issuing shares. It comes in two figures: the authorised capital, which is the ceiling set in your MOA, and the paid-up capital, which is what shareholders have actually paid in. When you issue new shares, your paid-up capital rises towards that ceiling.
If the issue would take you past your authorised capital, you first raise the authorised limit by altering the capital clause of the MOA and filing Form SH-7. Once there is room, you issue the shares by the route that suits your situation.
Methods of issuing share capital
A company can issue shares through several routes, and the right one depends on who you are issuing to and why.
Rights issue
Section 62(1)(a)New shares offered to existing shareholders in proportion to their holding.
Private placement
Section 42Shares offered to a select group of up to 200 identified investors. This is the most common route for a startup or private company raising from investors, and it is set out step by step below.
Preferential allotment
Section 62(1)(c)Shares issued to chosen persons at a valued price, by a special resolution.
Bonus issue
Section 63Free shares given to existing shareholders out of the company's reserves.
ESOP
Section 62(1)(b)Shares offered to employees under an employee stock option scheme.
Sweat equity
Section 54Shares issued to directors or employees for their know-how or services.
We assess which route fits your goal and walk you through it.
Private placement, step by step
Private placement is the most common route for a startup or private company raising from investors, and Section 42 sets a strict process.
Board approval
The board approves the offer, the persons to be offered, and the terms.
Valuation
A registered valuer values the shares, which sets the price.
Special resolution
The shareholders approve the offer by a special resolution at a general meeting.
File MGT-14
We file the special resolution with the ROC in Form MGT-14 within 30 days.
Offer letter
After MGT-14, we issue the private placement offer letter in Form PAS-4 to the identified persons.
Application money
Investors pay through banking channels into a separate bank account, never in cash.
Allotment
The company allots the shares within 60 days of receiving the money.
File PAS-3
We file the return of allotment in Form PAS-3 within 15 days of allotment, after which the money can be used.
Share certificates
The company issues certificates in Form SH-1 within two months, and pays stamp duty within 30 days.
Forms and timelines
| Step | Form | Timeline |
|---|---|---|
| Increase authorised capital, if needed | SH-7 | Within 30 days of the resolution |
| Special resolution for the issue | MGT-14 | Within 30 days of the resolution |
| Private placement offer letter | PAS-4 | After MGT-14, to identified persons |
| Return of allotment | PAS-3 | Within 15 days of allotment |
| Share certificates | SH-1 | Within two months of allotment |
Key rules of private placement
A private placement has firm limits, and missing them can turn it into a public issue:
- The offer cannot go to more than 200 persons in a financial year, per kind of security, leaving out QIBs and ESOP holders
- Money must come through banking channels, held in a separate bank account until allotment
- The company cannot use the money until PAS-3 is filed
- Allotment must happen within 60 days, or the money is refunded within 15 days, with 12% interest after that
- The offer cannot be advertised or made public in any way
What getting it wrong costs
The penalty under Section 42 is the amount raised or ₹2 crore, whichever is lower. That is the largest single consequence attached to any filing on this site, and it is why the process is worth following exactly.
A defective private placement can also be treated as a public issue, which is a different regulatory regime altogether. Both risks are avoidable, and both come down to the route, the valuation, and the timeline.
How AMpuesto helps
Tell us how much you want to raise and who you are issuing to. We advise on the right route, arrange the valuation, draft the board and shareholder resolutions, and prepare the offer letter. We file MGT-14, PAS-3, and SH-7 where needed, issue the share certificates, and update your register of members. One point of contact runs it from resolution to allotment.
Why issue shares through a Chartered Accountant
Issuing shares is a tightly regulated corporate action where a missed form or a late allotment carries real penalties, and a defective private placement can be treated as a public issue. Getting the route, the valuation, and the timeline right is what keeps it clean.
Share issues are event-based filings, so they sit alongside your yearly obligations under private limited annual filing, and alongside other event filings such as a change of director or a change in the MOA. If you are raising from investors, our virtual CFO services cover the models and due diligence support that go with a round.
Frequently asked questions
What is the issue of share capital?
What are the ways to issue shares?
Who can raise money through private placement?
Can shares be issued at a premium?
When is PAS-3 filed?
What is the time limit for allotment?
What is the penalty for non-compliance?
Do I need to increase authorised capital first?
Raise your round cleanly
Tell us how much you are raising and from whom. We pick the route, arrange the valuation, and file every form inside its deadline.
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