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Authorised & Paid Up Capital of a Company

Updated on July 18th, 2020 at 11:50 am

Well, when you are registering a company, you will come across the words Authorised Capital and the Paid-up Capital of the proposed company. In this blog post, we would briefly explain the meaning of these terms in the context of the company. The initial capital of the company implies long term investment introduced by the subscribers of the MOA. These are non-returnable investments and does not guarantee a fixed return, however, entitles the shareholder to the share in profits of the company.

Authorised capital is mentioned in the Memorandum of Association (MOA) of the company. This sets a limit on the capacity of the company to raise its equity capital. The government fee of company registration also depends on the authorised capital of the company. The promoters then subscribe to the capital of the company by signing on the last page of the MOA, that is known as “Subscribed Capital”. It is a promise undertaken by the shareholders to pay to the capital of the company. The subscribed capital can be lesser than the authorised capital. The subscribed capital became paid-up capital when the company received the amount of money from the shareholder.

As per new provisions of the companies act,2013, a newly incorporated company can not commence its business operations unless the subscribed amount is received from all the subscribers of the MOA. After the receipt of the subscription money, the company has to file Form INC-20A to the ROC.

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