What is Paid-Up Capital and Authorised Capital of a company?

To determine how long you held the asset, you generally count from the day after the day you acquired the asset up to and including the day you disposed of the asset. Issued capital, on the other hand, is the total number of shares that a company has issued to shareholders. This is the actual amount of capital that the company has raised from the issuance of new shares. Before starting a business, company is in need of funds to carry out its activities and functions. However, company do not have enough money to invest, so the company raise the funds from public by issuing shares and debentures. Hence , basically the amount collected by company by issuing shares is known as “Share Capital”.

Importantly, by following the legal formalities and procedures required by law, the authorized capital may be increased at any time. Altering authorised capital involves a structured process that typically requires shareholder approval. Companies must follow legal procedures and comply with regulatory requirements specific to their jurisdiction. These procedures often involve convening board meetings, drafting resolutions, obtaining shareholder consent through voting, and seeking necessary approvals from regulatory authorities. The business-friendly environment in India, with its relaxed capital infusion regulations, appears particularly attractive and accommodating to foreign companies.

As a result, enterprises can now be formed with a paid-up capital as low as Rs. 1,000, illustrating improved business formation flexibility. A company needs to mention the amount of authorized capital in its Memorandum of Association (MOA). Individuals with significant investment income may be subject to the Net Investment Income Tax (NIIT).

It is not mandatory for a company to issue its entire authorized capital in the public subscription. It may choose to issue capital at different stages as per the needs and demand. Also, it is used to determine the Government or ROC fees for various compliances of a company, including its Registration or incorporation fees. On the other hand, paid up capital is used to conduct the day to day operations of a business. Also, it is used to determine the collective and individual liabilities of the shareholders towards the company. Rs. 6,00,000 from shareholders for the shares that it has issued, the paid-up capital would be Rs.

A. Factors to Consider in Determining Authorized Capital

A part of it is reserved to raise capital if the company needs it in the future. Earlier, a private limited company and public limited company used to require Rs 1 lakh and Rs 5 lakh as the minimum paid up capital for obtaining their registration. Authorized Share Capital is the maximum amount of share capital https://1investing.in/ that a company is authorized to raise. This limit is outlined in its constitutional documents and can only be changed with the approval of the shareholders. Before a publicly traded company can sell stock, it must specify a specific limit to the amount of share capital that it is authorized to raise.

Although the balance sheet mentions both authorised and paid-up capital, only Paid up Capital is used to calculate the firm’s net value. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The examples and/or scurities quoted (if any) are for illustration only and are not recommendatory. Therefore, investors should closely examine the implications of the alteration to assess its potential impact on their ownership stake and the company’s financial position. It can affect the number of shares that the company can legally issue, the par value or face value of shares, and the overall capitalization of the company. Additionally, depending on the alteration, it may also impact the rights and privileges attached to different classes of shares, such as voting rights or dividend preferences.

Issued and paid up share capital represents the amount of investment made in the company by its shareholders. Every share of a stock is supplied along with a base price, termed as the par. So, any sum provided by the investors that tops the value of par is counted as a paid-up capital above par. While entering on the balance sheet, the value of par of supplied shares is registered as the preferred stock or the common stock. The amount of authorized share capital must be listed in the company’s founding documents.

How to Register an LLP (Limited Liability Partnership)?

It is an essential term for the company perspective as they do not borrow but invite investors to invest in their company. After getting fully paid up shares, the company can not raise its funds unless it opts for a debt fund. Thus, the paid-up capital of a company does not cross the aggregate amount of authorized share capital. However, when the company issues the shares, there are chances that not all the shares sell out.

Paid-up Share Capital

In addition to taking care of the day-to-day operations, raising money is one of the most important tasks a company has in its hands. Entrepreneurs who plan to start a new company should know the difference between paid-up capital and authorised capital. Knowing these differences is vital to incorporating a company as well as raising money. Furthermore, it shall
be relevant to state that the paid up capital of the company can never be more
than its authorised share capital. A company’s paid-up capital figure represents the extent to which it depends on equity financing to fund its operations. Moreover, as the net worth of a company depends on the paid-up capital, it is a factor that is highly regarded by the companies.

Consequently, the authorized capital remains at Rs. 60,00,000 (€ approx.), while the paid-up capital amounts to Rs. 20,00,000 (€ approx.). Apart from this, changes in market conditions, mergers, or acquisitions can also prompt the need for alteration. Hence in this article, we learned about authorized capital, paid-up capital, and some significant differences. And I hope now all these things are clear and you are ready to dig into other similar concepts. In this article, we will learn about authorized capital, paid-up capital, and some significant differences.


A company’s capital is determined by the nature of its operations and the magnitude of those operations. The real sum of money shareholders have given the business in exchange for their shares is known as paid-up share capital. The approved share capital must always be equal to or less than the paid-up capital since a corporation may not issue more shares than the authorized share capital allows. Difference between authorised capital and paid-up capital The maximum value of shares that a company can issue to its shareholders is authorised capital.

Kavita Kumawat (Pursuing CA final) is an Article traniee at Goyal Mangal & Co. She is registered as a student of Institute of Charted Accountants of India and also a Commerce graduate from Maharani college, jaipur. Any user can view the Authorised Capital & Paid-up Capital details of any Indian company for free on the Ministry of Corporate Affairs (mca.gov.in) or on InstaFinancials.

The total value of the shares issued to the public is called paid-up capital. It is necessary to note that both authorized and issued & paid up capital are recorded in the books at their face value. In reality, companies may issue shares at their market value which may often be higher than their face value. A firm having paid-up capital can focus on its growth without borrowing funds. It must now issue shares that are always less than or equal to the permitted share capital in accordance with this authorized capital.

Out of that initially, the company requires Rs 250 Cr and after 2 years another Rs 250 Cr will be required. Small finance banks in India are required to have a minimum of Rs. 200 crore in paid-up voting equity capital. Every current company organization or start-up aspires to establish itself as a Private Company in this age of Private Companies. The fundamental qualifying criteria and documents are the basis for this. It is a complete myth that forming a Private Limited Company necessitates a significant financial commitment.

Net Investment Income Tax

Once investors start buying and selling shares on the resale market, no new paid-up capitalization is formed because the profits go to the selling stockholders rather than the issuing business. Paid-up capital is the amount of money a company has been paid from shareholders in exchange for shares of its stock. Paid-up capital is created when a company sells its shares on the primary market, directly to investors. A company that is fully paid-up has sold all available shares and thus cannot increase its capital unless it borrows money by taking on debt.

And hence the par value of the shares can not cross the value of authorized share capital. And the par value at which the shares sell in the stock market is called the paid share capital. Thus, issued share capital is only the portion of the share in the company’s stock for sale.

The lenient capital requirements in India present a stark contrast to the regulations in major European countries such as Germany, Switzerland, and Austria. In these countries, the minimum capital requirements for closely held companies, often referred to as Private Limited, typically range from € 5,000 to € 25,000. In India, the capital infusion process has undergone changes regarding the minimum capital requirements. The tax rate on most net capital gain is no higher than 15% for most individuals. A company’s paid-up capital figure thus represents the extent to which it depends onequity financingto fund its operations.

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