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Capital means the money or sum of money which is invested in a company to carry on its activities and business. The capital of a company is share capital. A company\u2019s capital is mainly received from the shareholders i.e. from shares and debentures. As the company is a legal entity it cannot generate money for investing it in the business i.e. capital. So it is collected from the shareholder by the way of issuing shares to them.<\/p>\n
What is an Authorized Capital? <\/p>\n
The authorized capital of a corporation is the maximum sum of share capital for which shares could be issued by a corporation. The initial authorized capital of the corporation is stated in the Memorandum of Association of the Company under the heading of \u201cCapital Clause\u201d. The authorized capital could be increased by the corporation at any time in the future with shareholders\u2019 approval as well as by paying an additional fee towards the Registrar of Companies. Though, there might be circumstances where some portion of the authorized share capital might remain un-issued. The number of share capital which has been issued towards the investors is recognized as the issued share capital.<\/p>\n
It is also a registered capital or nominal capital of the corporate. A corporation doesn\u2019t need to issue all its authorized capital within the public subscription. It may issue according to the needs and demands of the company. The authorized capital mentioned within the MoA is increased or decreased in the future by following the procedure that was laid down under the Companies Act, 2013, such as:<\/p>\n
\u00b7 Article of Association (AoA) of a company should authorize for increase or decrease in authorized capital and if such provision isn\u2019t there within the AoA, it should be amended as per Section 14 of the Companies Act.<\/p>\n
\u00b7 For increased or decrease in the authorized capital, a notice of the same should be issued to the Directors, Members and Auditors of the company for calling a meeting with the Board of Directors and a general meeting with the shareholders to obtain their approval.<\/p>\n
\u00b7 Within 30 days of passing the resolution, the government informs the registrar of the company along with the copy of the resolution, a notice of General Meeting, and amended MOA in Form SH-7.<\/p>\n
What is the meaning of Paid-up Share Capital?<\/p>\n
Paid-up share capital of a corporation is the sum of money for which shares have been issued towards the shareholder for which payment was made by the shareholders. This sum is basically the actual fund that the corporation receives on the issue of shares. In general, this amount is raised as Initial Public Offering as well as forms part of the corporation\u2019s Finance. Paid-up capital would always be less than authorized capital as a corporation cannot issue shares above its authorized capital.<\/p>\n
The Companies Act, 2013 previously mandated that a Private Limited Company must have a minimum paid-up capital of Rs.1 lakh and a public company must have a minimum paid-up capital of 5 lakh. This intended that Rs.1 lakh worth of money must be invested in the corporation by the purchase of the corporation shares by the shareholders in order to start a business. Though, the Companies Amendment Act, 2015 removed such requirement and relaxed the minimum requirement for paid-up capital. Thus, there is now no requirement for any minimum capital towards being invested to start a private limited company. <\/p>\n
Registrar of Companies (ROC) needs to be updated with, in case of any alteration in the Authorized 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.<\/p>\n
What is the difference between authorized and Paid-up Share Capital?<\/p>\n
Paid-up capital forms a portion of the authorized capital. Let us see some of the major differences between the authorized and Paid-up Share Capital. They include:<\/p>\n