Authorized Capital

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

AspectAuthorized CapitalPaid-up Capital DefinitionMaximum capital company can issueCapital actually paid by shareholders RelationshipAlways ≥ Paid-up CapitalAlways ≤ Authorized Capital Stamp DutyPayable on full amountNo separate stamp duty ChangeRequires MoA amendmentCan 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.