Authorised Capital, Issued capital and paid-up capital of a company explained

When a Public Limited or a Private Limited Company is to be incorporated, the promoters of the company must decide on the amount of authorized capital for the company.

The Authorised Capital of a company means the maximum value of shares a company can allot to its shareholders.  The promoters of the proposed company shall decide the number of shares and face value of each share that comprises the authorized capital of the company.  For example, if the promoters have decided authorized capital of a company as Rs.100000/- and if the face value of each share is fixed as Rs.10/- then the authorized capital of the company comprises 10000 number of shares of Rs.10 each (i.e. 10000×10=100000). As per prevailing rules of company law, all new private limited companies and one person company (OPC) must have minimum authorized capital of Rs.1 lakh.  The new Public limited company can be registered with a minimum authorized capital of Rs.5 lakh. Whenever, authorized capital to be increased same to be notified to ROC through form SH-7 within 30 days of the passing of the ordinary resolution, with prescribed fees and attachments required u/s 64. The company has to amend the article of association if the article of association does not already contain a provision to increase authorised share capital. Issued shares or outstanding shares are the amounts of shares issued by the company to its shareholder. The issued or outstanding share capital of a company can never exceed the authorized capital of a company. The issued shares may be or may not be fully subscribed by the members. The paid up capital is the amount of money a company has received from shareholders at face value rate of the shares.

The Ministry of Corporate Affairs (MCA) while registering a company charges a minimum fee of Rs.5000/- for authorised capital of up to Rs.100000/- (Rupees one lakh only). The authorized capital of the company shall be as specified in the Memorandum of Association of the company.  In case the authorised capital of a company is more than Rs.100000/-, fee for the same will go up according to the size of the authorised capital of the company. The requirement of having a minimum paid up share capital of one lakh for a private company and five lakh Rupees by a public company has been removed in the companies’ Amendment Act 2015. Hence, going forward, a private Ltd. or a public Ltd. A company can be incorporated even with the small size of paid up capital say Rs.50000/-. However, for increasing the paid up capital of the company, same to be informed to ROC by filing form PAS-3 for further allotment of shares.

Click below to know more about;

• Key differences between private limited and public limited company
• Guidelines on Memorandum of Association and Article of Association of a company
• Company registration process in India explained
• What are equity shares?

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