What is Authorized Capital, Issued Capital and Paid-Up Capital? | Explained!

Before directly heading into definitions, first make clear that What are shares? and Why a company needs funding? When a new business starts operating, the most crucial time for it is the starting phase and handling the cashflow. Because 80% of startup fail just because of lack of investment. So, a business needs funding. It could come from savings, angel investment or venture capitalist.
For investment, a company issue the shares which represent a part or ownership in the company. To hold the share of the company, a shareholder must pay for it in cash or in some kind of service a company needs. So that, the money can be used for some operation expenses.
Now, heading into the definitions and learning more about capital, lets dive deeper into this.
What is Authorized Capital?
A company has to register its maximum amount of capital to the Registrar of Companies(RoC). It means upto that amount a comapany is authorized to raise the capital. That is why it is called Authorized Capital. Which is why companies are registered with such authorized capital which is well above their current needs of financing. That is why it is also called Registered Capital or Nominal Capital. The limit of amount is outlined in the constitutional documents and can be changed with the approval of shareholders.
For example, if a company has a maximum authorized amount is ₹20 Lakh, it means a company cannot issue shares more than this amount of money, otherwise they have to raise the authorized capital in the constitutional documents. Because to issue more amount than authorized capital is against the law.
By this the another question arises.
What is Issued Capital?
If a company needs money for further operations, it can issue some portion of the shares to the investors and can keep some portion to issue more shares at a later date. So, issued capital is the amount of capital which has been issued by the company to the shareholders.
Suppose, a company has a authorized capital of ₹20 Lakh and it needs ₹10 Lakh for the further operations. So, the company can issue ₹10 lakh to the shareholders and the shares of ₹10 lakh will be sold to the investors. That is why in this case ₹10 Lakh will be the issued capital.
But if the company needs ₹25 lakh for its operations and authorized capital is less, then first the company has to increase the authorized capital, after that they can issue the capital.
It means issued capital can never be more than authorized capital. It has to be less than or equal to the authorized capital.
What is Paid Up Capital?
It is the amount of capital for which the company has received the payments from the shareholders. A paid up capital is created when a company sell its shares on the primary market, directly to the investors, usually through an Initial Public Offering(IPO).
If the issued capital is equal to the paid-up capital, it means the shareholders have paid fully for the shares. And if it is more than the paid-up capital, it means shareholders have not done the full payment and the company can ask for the full payment of the shares they own, as the company need the money for operations.
With the companies Amendment Act 2015, there is no minimum requirement of paid-up capital of the company. It means a company can even operate with ₹1000 as paid-up capital.
Lets extend the above example. If a company has issued ₹10 lakh capital and shareholder has paid ₹5 lakh for the shares he own. It means the paid-up capital will be ₹5 lakh and shareholder has to pay more ₹5 lakh, which is the remaining amount.
Read the full article on What is Authorized Capital, Issued Capital and Paid Up Capital? - tecaster.blogspot.com/2020/03...
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[@VinayakGrover]

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[@azhar220685]

But what is the gain for investor? Supposedly I bought 5 shares And the capital is 25 lakh and shares issued are 2.5 lakh at the price of 10rs each. What benefits/ returns do I get?

[@kousik8042]

very easy explanation by handdraw style....easy to understand...thank you

[@devkundu8107]

This is very underrated channel.. hope you will have million subscribers soon.

[@VinayakGrover]

Thanks for your views. It means a lot.

[@rpatil9175]

Thank you so much sir 💐

[@vanshikawadhwani6119]

Nice explaination! How you make such visual presentation? Like a hand writing everything? Which app or software do you use?

[@v.revanth979]

Great explanation bro.... I learned something new today by your video , can you please tell me a book that having all basic to advanced level Accounting terminologies with easy English

[@VinayakGrover]

Let me check

[@v.revanth979]

@@VinayakGrover ok , tell me the best

[@sachinpk6]

Hello Vinayak, What would be the impact of increasing issued capital on Cost of equity?

[@jatin...siradhana6654]

Very nice explained

[@santoshkasbe2947]

Great bro well explained

[@digvijayyamagekar4300]

sir, I have a question I was seeing the capital structure of a company from 2010 to 2020 in which authorized capital was increasing and also issued capital and also issued shares were increasing. it seems like companies' equity is growing but how is this possible ? total shares should stay the same right?

[@sheerenbegumkhan3677]

Thank you so much❤😊

[@madhavshort2003]

Thank you

[@grannyssecret]

Authorised capital single member company main company register karty waqt company bank main jama kerny hoty hen?

[@tankailun2926]

Your visual presentation very clear, even though I dont understand Hindi.

[@VinayakGrover]

Thank you

[@lokeshtv3468]

Thank u for clearing my doubt.

[@VinayakGrover]

You're most welcome

[@user-px3fp6ye9r]

love it bro

[@ms.santosh6640]

Thanks 🙏

[@sumanbhowmik4842]

Fantastic

[@lokendrasinghchouhan156]

Keep Going Brother Ur Content is to Good ,One day you're Channel will Get Success Definitely 👍👍

[@VinayakGrover]

Thank you so much 😀

[@dageprem1658]

Superb explanation brother keep going

[@VinayakGrover]

Thank you so much 🙂

[@saayatoyou00]

what are relevant laws to issue bonus shares by private limited company

[@poojaprahladkumawat9863]

Thank you sir

[@VinayakGrover]

Welcome

[@muneebkhan8519]

Sir What is Fully paid Share Or Subscribed Shares?

[@roninxsoul47]

Love from Nepal

[@sumitkakkad2205]

SIR AUTHORIZED SHARE CAPITAL DECIDE HO JAYE USKE BAAD PAISE COMPANY ME JO SHAREHOLDERS HAI JAISE KI DIRECTOR OWNER WO PAISE DENGE AUR COMPANY USKO USKE SHARES DEGINESA NA ??

[@kishanmaru1459]

Thanks Bro ☺️👌

[@VinayakGrover]

Welcome 😊

[@swatitambe4322]

Very nice 👍

[@VinayakGrover]

Thank you! Cheers!

[@rockylucy2798]

Hi can use my paid up capital for paying stipend for my interns

[@himanshushorts2386]

Well explanation 😊😊😊😊

[@VinayakGrover]

Thanks a lot 😊

[@Natureview_381]

Thank you for help me bro❤️❤️❤️❤️🙏

[@VinayakGrover]

Always welcome

[@AnilKumar-kt4lq]

Nice

[@kunaldev1257]

Authorised capital kon decide krta h , pls tell

[@vikram.muradia]

Vinayak grover, awesome..

[@kunaldev1257]

20 lac ki authorised kaise bni, nhi samaj aya, kya initial capital k base p hai kya , kon decide karta h

[@allabouthappy]

Mera OPC PRIVATE LIMITED hai...kya mujhe paid-up capital 1lakh deposit karna hoga? Aur deposit ke baad kya me uss amount ko use kar sakta hun?

[@VinayakGrover]

Thanks for asking, there is no minimum requirement of paid-up capital according to companies Amendment Act 2015. If you have 1 lakh deposit, you can use it in your daily operations or in any business requirement.

[@karobariadmi4222]

Can I request SECP to give some more time to deposit paid-up capital?

[@brjgtm2011]

Thank you from Nepal .... but can u tell me .. remaining 10 lakhs can be issued to public like IPO ?

[@VinayakGrover]

Thank you very much. Ofcourse, you can issue remaining shares in IPO.

[@AshishMannu]

Let's assume I am opening a company with 2 directors having 50-50 share in the company. Our authorised capital is 1 lacs but we want to keep our paid up capital as 0. Will that mean that neither of us are holding any shares? Will we have to buy shares in our own company by paying 50k each so that we are holding 50-50 shares? Sorry if it's a dumb question but I am a bit confused.

[@RameshKumar-rt8xb]

dude this is a stupid video looks like he is a kid and has no knowledge in this domain.

[@vendam4331]

Bhai, Face value, Book Value and Market Value ke bareme Samjhaona

[@VinayakGrover]

Hi, I have already made a video on above topic. What is Face value, Book value and market value - kzbin.info/www/bejne/eZPXdKNrosumhsk

[@VarshaYadav-br1jy]

Sir pls make vdo on calledup capital and subscribed capital

[@VinayakGrover]

Sure, I will

[@darkspark4132]

❤️❤️❤️

[@bobbysingh1432]

Well Explanation in Simple Language👌 Bass Ek Doubt Hai Sir🤔 Authorised Capital Kaun Banata Hai… Jiski Company Hai Wo Ya Phir Jahan Registered Karte Hain Wo Officials…❓❓

[@VinayakGrover]

Authorized capital is decided by shareholders of the company.

[@bobbysingh1432]

@@VinayakGrover 😊Okay n Thanks Sir🙏🏽

[@maganlallohar2978]

Sir phir ye limit authorised share capital ke liye kon decide krta h

[@VinayakGrover]

When a company is formed, promotors of the company have the ultimate right to decide the authorized capital. But it can be changed by following certain laws.

[@y0us3falsaif]

hope what is in Eng

[@ravinderkumarbncc1185]

Padap capital 2015 act yah 2013 act

[@VinayakGrover]

Its 2015 act

[@HappyMunchkin2512]

Well Explained 👍😇

[@VinayakGrover]

Thanks 🙂

[@Duncan456]

The writing is in English, but what language are you speaking?

[@VinayakGrover]

My content is in Hindi language

[@mohitsingh1152]

Greate

[@VinayakGrover]

Thanks

[@ahmedunisabegum8411]

Your video is good, But it in NOT in english

[@VinayakGrover]

No problem, from next time I will keep this in mind.

[@ahmedunisabegum8411]

@@VinayakGrover That would be great help, as i teach English medium students

[@RameshKumar-rt8xb]

totally wrong information...