{"id":17065,"date":"2020-12-01T10:33:36","date_gmt":"2020-12-01T05:03:36","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=17065"},"modified":"2021-03-19T18:20:59","modified_gmt":"2021-03-19T12:50:59","slug":"concept-and-difference-of-authorised-capital-and-paid-up-capital","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/","title":{"rendered":"Concept and Difference of Authorised Capital and Paid up Capital"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Every company regardless of its type, size, activities, nature of the business, and category, will need to classify its share capital under the different types of financial statement. Further, the capital framework of a company is mainly classified into two categories, i.e., authorized capital and paid up capital.<\/p>\n\n\n\n<p>Moreover, as per the\nprovisions of the Companies Amendment Act 2015, the requirement to have the\nminimum paid-up capital has been done away with, whereas, the concept of\nauthorised capital still exists.&nbsp; <\/p>\n\n\n\n<p>In this blog, we will\ndiscuss the concept and difference of authorised capital and paid up capital.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3ad2fdb6827\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3ad2fdb6827\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Concept_of_Share_Capital\" title=\"Concept of Share Capital\">Concept of Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Different_Types_of_Share_Capital\" title=\"Different Types of Share Capital\">Different Types of Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Concept_of_Authorised_Share_Capital\" title=\"Concept of Authorised Share Capital \">Concept of Authorised Share Capital <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Concept_of_Paid_up_Capital\" title=\"Concept of Paid up Capital\">Concept of Paid up Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Example_for_Types_of_Share_Capital\" title=\"Example for Types of Share Capital\">Example for Types of Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Difference_Between_Authorised_Capital_and_Paid_up_Capital\" title=\"Difference Between Authorised Capital and Paid up Capital\">Difference Between Authorised Capital and Paid up Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/concept-and-difference-of-authorised-capital-and-paid-up-capital\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Share_Capital\"><\/span>Concept of Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term Share Capital means the amount of money or sum invested in a company to carry out on its activities, functions and business. Further, a company receives its capital from the shareholders, i.e., in the form of shares and debentures. <\/p>\n\n\n\n<p>However, it shall be\nrelevant to mention that a company being a legal entity cannot generate revenue\nfor investing in its capital. Therefore, it needs to collect the same by\nissuing shares to the shareholders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Types_of_Share_Capital\"><\/span>Different Types of Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/12\/Different-Types-of-Share-Capital.png\" alt=\"Types of Share Capital\" class=\"wp-image-17067\" width=\"415\" height=\"415\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/12\/Different-Types-of-Share-Capital.png 1000w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/12\/Different-Types-of-Share-Capital-150x150.png 150w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/12\/Different-Types-of-Share-Capital-300x300.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/12\/Different-Types-of-Share-Capital-768x768.png 768w\" sizes=\"(max-width: 415px) 100vw, 415px\" \/><\/figure><\/div>\n\n\n\n<p><strong>The different types of Share Capital are as follows:<\/strong><\/p>\n\n\n\n<ol><li>Authorised\nShare Capital;<\/li><li>Issued\nCapital;<\/li><li>Subscribed\nCapital;<\/li><li>Paid-up\nCapital;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Authorised_Share_Capital\"><\/span>Concept of Authorised Share Capital <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term \u201cAuthorised Share Capital\u201d denotes the maximum amount of capital that a company can raise from its shareholders by issuing shares to them in return. Further, it is not compulsory for a company to give the whole of its authorised share capital for public subscription. Also, a company may choose to provide the same for issuance at different stages based on its needs and demand.<\/p>\n\n\n\n<p>Moreover,\nit shall be considerate to mention that it is necessary for the company to\nmention the amount of authorised share capital in its MOA (Memorandum of\nAssociation) under the heading of \u201cCapital Clause\u201d. Likewise, a company is not\nallowed to give shares more than the amount mentioned in the capital clause as\nwell.<\/p>\n\n\n\n<p>Further, the decrease or <strong><a href=\"https:\/\/swaritadvisors.com\/increase-in-authorized-capital\" class=\"text-primary\">increase of authorised share capital<\/a><\/strong> is governed and regulated by the provisions of the Companies Act 2013.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Paid_up_Capital\"><\/span>Concept of Paid up Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term \u201cPaid up\nCapital\u201d means the amount of share price paid by the shareholders for the\nshares held by them. That means it is the actual sum that a company receives\nfrom its shareholders by issuing them shares in return.<\/p>\n\n\n\n<p>Further, a company\nraises its paid up capital by receiving shares subscription from IPO (Initial\nPublic Offering).In other words, a company raises finance by issuing fresh\ncapital, which later becomes part of its paid-up capital.<\/p>\n\n\n\n<p>Furthermore, it shall\nbe relevant to state that the paid up capital of the company can never be more\nthan its authorised share capital.<\/p>\n\n\n\n<p>Earlier, a <strong><a class=\"text-primary\" href=\"https:\/\/swaritadvisors.com\/private-limited-company-registration\">private limited company<\/a><\/strong> and public limited company used to require Rs 1 lakh and Rs 5 lakh as the minimum paid up capital for obtaining their registration. However, after the implementation of the <strong>Companies Amendment Act 2015<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Indian_company_law\"><strong>[1]<\/strong><\/a><\/sup>, there is no for any company, whether it is a private or public limited company to have any amount as the minimum paid up capital.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Example_for_Types_of_Share_Capital\"><\/span>Example for Types of Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>ABC Pvt Ltd was registered\nwith the registrar of companies with an authorised capital of Rs 20,000,000,\nwhere each such share is of Rs 10.<\/p>\n\n\n\n<p>In response to the advertisements and classifieds issued by the company to subscribe to shares, the actual share applications received were for 10, 00,000 shares. However, the company issued shares for only 7, 00,000ata share price of Rs 8 per share.<\/p>\n\n\n\n<p>Further, all the calls have been duly met except for three shareholders, who\nstill need to pay for their 6000 shares in total.<\/p>\n\n\n\n<p><strong>Solution:<\/strong><\/p>\n\n\n\n<ol><li>Authorized Share Capital = Rs 20,000,000<strong><\/strong><\/li><li>Subscribed Share Capital = 1,000, 000 x Rs 10 = Rs 10,000,000<strong><\/strong><\/li><li>Issued Share Capital = 7, 00, 000 x Rs 10 = Rs 70, 00,000<strong><\/strong><\/li><li>Called-up Share Capital\n= 7, 00,000 x Rs 8 = Rs 56, 00,000<strong><\/strong><\/li><li>Paid-up Share Capital = 56, 00,000 \u2013 (6, 000 x Rs 8) = Rs 55,\n52,000<strong><\/strong><\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_Between_Authorised_Capital_and_Paid_up_Capital\"><\/span>Difference Between Authorised Capital and Paid up Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The key points of difference between\nAuthorised Capital and Paid up Capital are as follows:<\/p>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  <strong>S.No<\/strong>\n  <\/td><td>   <strong>Authorized Share Capital<\/strong>   <\/td><td>   <strong>Paid up Share Capital<\/strong>   <\/td><\/tr><tr><td>\n  1.\n  <\/td><td>\n  The term \u201cAuthorised Share\n  Capital\u201d denotes the maximum value of shares issued to the shareholders.\n  <\/td><td>   The term \u201cPaid up Share Capital\u201d   denotes the amount or sum paid by the shareholders to the company for the shares held by them.    <\/td><\/tr><tr><td>\n  2.\n  <\/td><td>\n  The amount of Authorised Share\n  Capital is mentioned in the Capital Clause of the MOA (Memorandum of\n  Association).\n  <\/td><td>\n  The amount of Paid up Share\n  Capital is mentioned in the Capital Clause of the MOA (Memorandum of\n  Association).\n  <\/td><\/tr><tr><td>\n  3.\n  <\/td><td>   To increase the amount of   Authorised Share Capital, the directors of the company need to amend its MOA by following the process mentioned in the provisions of the Companies Act 2013.    <\/td><td>   To increase the amount of Paid up Share Capital, the directors of the company can follow the method of IPO and Private   Placement for the same.   <\/td><\/tr><tr><td>\n  4.&nbsp;\n  <\/td><td>   After the implementation of the Companies Amendment Act   2015, there is no for any company, whether it is a private or public limited company to have any amount as the minimum paid up capital.   <\/td><td>   The amount of paid up capital of a company can never be more than its authorised share capital. That means the same can be either equal or lower to its Authorised   Share Capital.   <\/td><\/tr><tr><td>\n  5.\n  <\/td><td>   A company cannot issue any amount of its authorised share capital to the shareholders.   <\/td><td>   A company is eligible to issue shares and also buy-back them, subject to certain terms and conditions.   <\/td><\/tr><tr><td>\n  6.\n  <\/td><td>   A company cannot use its authorised share capital to calculate the amount of its net worth in any financial year.   <\/td><td>   The paid up capital of a company   is used for the operations as follows:   For meeting business and   operational expenses; For calculating the net worth of   the company in the current financial year;      <\/td><\/tr><tr><td>\n  7.\n  \n  <\/td><td>\n  The amount of Authorised Share\n  Capital includes Paid up Share Capital.\n  <\/td><td>\n  The amount of Paid up Share\n  Capital does not include Authorised Share Capital.\n  <\/td><\/tr><tr><td>\n  8.\n  \n  <\/td><td>   The company requires shareholders permission to increase the amount of authorised share capital.   <\/td><td>   The company does not require shareholders permission to increase the amount of paid up share capital.   <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a nutshell, Authorised Share Capital denotes the maximum amount\nof capital that a company can raise from its shareholders by issuing shares to\nthem in return. In contrast, Paid up Capital means the amount of share price\npaid by the shareholders for the shares held by them.<\/p>\n\n\n\n<p>Further, the members need to decide the\namount of Authorised Share Capital and Paid up Capital at the time of\nregistration itself, as they need to get the same recorded in the MOA of the\ncompany.<\/p>\n\n\n\n<p>In case of any other doubts or dilemma, reach out to Swarit Advisors.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/minimum-paid-up-capital-for-private-limited-company\/\">Minimum Paid-Up Capital for Private Limited Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Every company regardless of its type, size, activities, nature of the business, and category, will need to classify its share capital under the different types of financial statement. Further, the capital framework of a company is mainly classified into two categories, i.e., authorized capital and paid up capital. Moreover, as per the provisions of the [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":17068,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[380],"tags":[990],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/17065"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=17065"}],"version-history":[{"count":7,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/17065\/revisions"}],"predecessor-version":[{"id":18205,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/17065\/revisions\/18205"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/17068"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=17065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=17065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=17065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}