Authorized Capital (also called Authorized Share Capital or Nominal Capital) is the maximum amount of share capital that a company is authorized to issue to its shareholders as stated in its Memorandum of Association.
Key Points
- Upper Limit: Company cannot issue shares beyond authorized capital without increasing it
- Minimum Requirement: Rs. 1 lakh for Private Limited Company (no minimum paid-up required)
- Stamp Duty: Payable on authorized capital at rates varying by state
- Flexibility: Can be increased by passing ordinary resolution and paying additional stamp duty
Authorized vs Paid-up Capital
| Aspect | Authorized Capital | Paid-up Capital |
|---|---|---|
| Definition | Maximum capital company can issue | Capital actually paid by shareholders |
| Relationship | Always ≥ Paid-up Capital | Always ≤ Authorized Capital |
| Stamp Duty | Payable on full amount | No separate stamp duty |
| Change | Requires MoA amendment | Can increase up to authorized limit |
Example
If a company has authorized capital of Rs. 10 lakhs divided into 1,00,000 shares of Rs. 10 each, it can issue up to 1,00,000 shares. If it has issued only 50,000 shares (paid-up capital of Rs. 5 lakhs), it can issue 50,000 more shares without increasing authorized capital.
Related Services
Need help with authorized capital? Explore our related services: