Authorized share capital

Please explain Authorized Share Capital and Issued, Subscribed and Paid Up share capital.

Authorised Capital of a Company

The authorised capital of a company is the maximum amount of share capital for which shares can be issued by a company. The initial authorised capital of the Company is mentioned in the Memorandum of Association of the Company and is usually Rs. 1 lakh. The authorised capital can be increased by the company at anytime with shareholders approval and by paying additional fee to the Registrar of Companies

For Example: If ABC Private Limited Company has an authorised capital of Rs.10 lakh, it means that ABC Private Limited Company can issue shares worth upto Rs.10 lakhs to its investors. ABC Private Limited Company cannot issue shares worth Rs.11 lakhs to its investors. However, the Company can issue shares worth only Rs.5 lakh to its investors – as the company has not issued shares in excess of the authorised capital.

Issued Share Capital

Issued capital Is the capital raised against issuing the shares of the Entity. Issued Capital is issued by the company from time to time. The issued capital has to be within the limits of the authorized capital as stated in the memorandum. The issued share capital is either equal to or less than the authorized capital. It can never be more than the authorized capital of the company.

Subscribed Share Capital

Subscribed capital is that part of the issued capital which is subscribed (accepted) by the public. Subscribed capital is increased when members have subscribed to the shares of the company. Subscribed share capital should also be equal to or less than the issued share capital. The un-allotted capital out of the subscribed share capital is called unsubscribed share capital.

Paid up Capital of a Company

Paid-up share capital is the aggregate amount of money received from shareholders for shares issued. Hence, the capital allotted and paid by shareholders is called paid-up capital. This shows the amount received either in cash or in kind by the company from the allottees of shares subscribed by them. In simple terms a Paid up share capital of a company is the amount of money for which shares were issued to the shareholder for which payment was made by the shareholder.

The companies Act, 2013 earlier mandated that all Private Limited Companies have a minimum paid up capital of Rs.1 lakh. This meant that Rs.1 lakh worth of money had to be invested in the company by purchase of the company shares by the shareholders to start business. However, the Companies Amendment Act, 2015 relaxed the minimum requirement for paid up capital. Therefore, there is now no requirement for any minimum capital to be invested to start a private limited company.

1 Like