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February 16th, 2019 in Companies Act

Authorised Capital and Paid-up Share Capital

Authorised Capital and Paid-up Share Capital

 

Every Company (OPC, Private, Public, LLP etc.,) irrespective of size, type and category of business will have its share capital classified under different types in the financial statement. But, as per the Companies Amendment Act, 2015 the provision of minimum paid-up capital requirement for the Companies has been removed. However, the requirement of authorized share capital still exists.

In this Article, we will discuss the detailed difference between

 

Authorised Capital

Section 2(8) of The Companies Act 2013 defines that Authorised capital or nominal capital means such maximum amount of share capital of the company that is authorised by the (MOA) memorandum of association of a company. However, the Authorized capital or nominal capital can be altered with certain procedures which are governed by Section 61-64 of the Companies Act read along with Section 13 and 14 of the act which governs the alterations to the Chartered Documents that are (MOA) Memorandum Of Association and (AOA) Articles Of Association of the company.

For example: If ABC Pvt. Ltd has an Authorised Capital Rs. 50 lakhs and shares issued up to an amount of Rs. 30 Lakhs to shareholders. It means ABC Pvt. Ltd has issued the shares not in excess of the maximum limit i.e. Authorised capital of the Company and also has an option in future to issue more shares amounting to Rs. 20 lakhs without raising the Authorised Share Capital

However, if ABC Pvt. Ltd wants to issue shares of an amount of Rs. 60 Lakhs to shareholders with the same Authorised capital of Rs 50 Lakhs. Then it is not possible however, to do so the company has to carry out process of increasing Authorised share capital and then issue of shares to shareholders can be done.

Paid-up Share Capital

As per Section 2(64) of Companies Act 2013, Paid up share capital or share capital paid up means such aggregate amount of money credited as paid up that is equivalent to the amount received as

  • Paid-up in respect of shares issued and
  • Any amount credited as paid-up in respect of shares of the company

Excluding any other amount received in respect of such shares, by whatever name called.

At any point of time, paid up capital can be less than or equal to Authorised share capital and the Company cannot issue shares beyond the Authorised share capital of the Company. However, the limit of Authorised Capital can be extended.

But, with the Companies Amendment Act 2015, there is no minimum limit or requirement of paid up capital of the Company. That means now Company can be formed with even Rs. 10,000 or less as paid up capital.

Registrar of Companies (ROC) needs to be updated with, in case of any alteration in the Authorised Capital and Paid-Up Share Capital. The rectified details will then be recorded in the Companies Master Data of the Ministry of Corporate Affairs (MCA) that can be viewed by the public.