Every business requires additional funds over time to support growth, expansion, and operational needs. While short-term financial requirements can often be managed through loans or advances, long-term funding is usually raised through equity. For a company, this may involve issuing additional shares to investors or existing shareholders. However, the company can only issue shares up to the limit specified as its authorised share capital in the Memorandum of Association (MOA).

Authorised capital represents the maximum amount of share capital that a company is legally allowed to issue to its shareholders. Paid-up capital, on the other hand, refers to the portion of authorised capital that has actually been issued and fully paid for by shareholders. A company cannot issue shares beyond its authorised capital limit. Therefore, when the paid-up capital approaches or reaches the authorised capital threshold, the company must increase its authorised capital if it wishes to issue additional shares.

Increasing authorised capital involves amending the Memorandum of Association to raise the permitted capital limit. This allows the company to issue more shares and raise additional funds from existing or new investors. Companies often increase their authorised capital to finance expansion plans, launch new projects, support restructuring activities, convert debt into equity, or meet growing financial requirements. By increasing authorised capital, a company gains greater flexibility to raise funds and support its long-term business objectives.