An Outlook on Authorized Share Capital for Company Registration

All corporations, disregarding their authoritative formation and size, will have a specified share capital. These are a segment of the numerous financial statements that the company has to summons and file per annum. There is an enormous squirt in the number of newest company registration in the country while the first nine months of the financial period.  The newest data accessible with the Ministry of Corporate Affairs (MCA) manifest that the total number of companies incorporated during the month of April-December 2020 went up by almost 21% to over 1.1 lakhs, contrasted to a 5.2% increases witnessed during the correlating nine-month phase in 2019.

While the Companies Act, 2015 has got eliminate the precondition for minimal paid-up capital, the demand for maintaining a basic authorized share capital is still complete.

In this write-up, we shall look at the prerequisites regarding the authorized share capital for COMPANY REGISTRATION along with other crucial details.

Many of the entrepreneurs starting a new Pvt company are uncertain about the concept of Authorized Share Capital for Company Registration.

What initiates the Company’s Capital Structure?

A company’s capital structure can be split into two dominant categories:

Authorized Share Capital:

Authorized share capital is the maximum portion of the capital for which the company may issue shares to its shareholders or promoters. The authorized share capital of company registration is a part of its memorandum of association under the capital clause. This is usually decided before incorporation. However, companies do have the option of raising their authorized share capital in the future by following specific steps.

For instance, imagine a company named ABC Private Ltd has an authorized share capital amounting to ₹20 lakhs and has issued shares for ₹15 lakhs. Likewise, in such a case, it can issue shares for ₹5 lakhs without raising or changing its initial authorized share capital. However, once it exceeds ₹20 lakhs, it will have to increase its authorized share capital before it issues any more shares to its benefactors and shareholders. 

Paid-up share capital designates an amount for which the resistant proceed shares to shareholders after they made the required payment to the firm. Additionally that, for any firm at any occurrence, the paid-up capital must be less than or comparable to its approved share capital.

Moreover, the firm is not eligible to issue share shares beyond its authorized share capital limit. Moreover, the paid-up capital must find its path to the company’s account in 30 days of the shares’ allocation. Owing to the advent of the Companies Amendment ACT 2015, the requirement for maintaining a minimum capital requirement for privately-held firms has been waived off.

Similarly, the requirement for maintaining a certified capital for the public company has been eliminated. Now such initiations can be set up with tied INR1000 as paid-up capital. Moreover, to modify the mini. Paid-up capital for an organization, the ROC must be refurbished, and the data connected to the update becomes a fragment of the company’s master facts.

Subscribed Capital

Subscribed capital is a segment of the paid-up capital or furnishes capital that the shareholders have concurred to put up through payment. As a consequence of fragmentary commitment, the shareholders are only responsible for unpaid amounts on the shares endorsed. 

Is it possible for issued capital to surpass the authorized capital?

Before starting any private limited company or public limited company, the investors and promoters need to decide on its Authorized Share Capital amount. This is because the authorized share capital limit establishes how many shares they will receive as a result of their investment in the company. Additionally, Issued or omitted shares are the shares that have been issued by a company to its shareholders.

Therefore, since the authorized capital sets the limit for the value of such shares, the paid-up or issued capital can never exceed the authorized share capital.

How Can Authorized Share Capital Be Raised?

The Ministry of Corporate Affairs charges a fee amounting to ₹5000 to allot a minimum authorized capital of ₹1 lakh to a private company. To further add more authorized capital, the shareholders will have to pay an additional fee as mentioned below.

S.NO               ADDITIONAL AMOUNT           FEES CHARGED
1 The minimum share capital of ₹1 lakh  ₹5000
2 Additional 1 lakh between INR 1 lakh and INR 5 lakhs ₹4000/ lakh
3 Additional 1 lakh between ₹5 lakhs and ₹50 lakhs ₹3000/ lakh
4 Additional 1 lakh between INR50 lakhs and INR1 crore ₹1000/ lakh
5 Additional 1 lakh far off ₹1 crore ₹750/ lakh

How Do Startups Raise Authorized Capital?

Most of the inception that proliferates nowadays are bootstrapped and are momentary on cash. Hence, they cannot pay large amounts to boost their authorized share capital during incorporation with the MCA. Hence, as a result, most promoters end up paying the minimum required authorized share capital of ₹1 lakh. Therefore, the issues share significance only that amount to their shareholders or establishing members.  In addition, the respite of the capital invested is in the form of either an unsecured loan or as a share installment. 

Additionally, this helps out them to decrease the requirement to grow share capital during the early phases of their company. Although, one the company inflates and needs account or equity, they raise the share capital limitation to matter more shares.

Consequently, most bootstrapping begins operations with the minimal required share capital for private corporations and leisurely raises the limitations as and when they start needing debt or equity financing. 

Registration Fees regarding the Authorized Share Capital

S.NO SHARE CAPITAL FEE(INR)
1 One Person Company and other small companies having share capital less than INR 10 lakhs For every additional 10,000 after the first 10,00,000 & below 50,00,000 2000       200
2 In addition, registering a company insight of nominal share capital below 1,00,000 500
3 For registering or submitting any document: Nominal share capital < INR 1 lakh Capital ranging between 10,00,00 and 50,00,00 If the Capital lies between 5,00,000 and 25,00,000 Capital lies between 25,00,000 and 1,00,00,000 Capital surpassing 1,00,00,000  200 300     400 500         600
4 If the company lacks any share capital: Share value as cited under AOA & number of shares falls below 20 Number of shares ranging between 20 and 200 2000     5000
5 Fee-related to registration or modification via the Registrar 200

Conclusion

Authorized share capital is an important asset for the company because it decides how much amount of share can be issues to the stakeholders. 

It is important to note down that the legality related to such capital is usually mentioned under the capital clause of MOA. It’s a good idea to increase such capital periodically since it helps in compensating for the liquidity crunch triggered by the financial crisis.

Also Read:
PRODUCER COMPANIES IN INDIA
9 Tips to Start a Successful Home-Based Business
By |2021-08-31T12:28:34+00:00August 31st, 2021|company registration|

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