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Authorised Capital and Paid-up Share Capital

Updated on March 13th, 2019 in Companies Act

Authorised Capital and Paid-up Share Capital

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

In this Article, we will discuss the detailed difference between

 

Authorised Share 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 Rs. 50 lakhs as an authorised share capital out of which Rs. 30 Lakhs shares has been issued to shareholders. It means ABC Pvt. Ltd has not issued the shares to its maximum capacity. In simpler words the company can issue Rs. 20 lakhs of more shares without applying for the increase in the Authorised Share Capital.

However, if ABC Pvt. Ltd wishes to issue Rs. 60 Lakhs shares to shareholders with the set limit of Rs 50 Lakhs authorised share capital. Then it is not possible however, to do this the company has to follow the procedure regarding the increase in the Authorised share capital. After such increase the company can issue shares to shareholders.

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.

Conclusion

At any given period of time the paid up capital can be same as authorised share capital or can be less too. Further, the Company is not permitted to issue more than the set limit of authorised share capital. However, the limit of Authorised Capital can be extended.

But, with the Companies Amendment Act 2015, there is no such requirement regarding the minimum paid up capital of the Company. Due to such amendment a company can now be incorporated 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 Master Data of companies on Ministry of Corporate Affairs (MCA) site that can be further viewed by the public

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