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authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the business.
Paid-up capital is the amount paid by the shareholders for the shares held by them in the company. It is the actual fund that the company receives from the issue of shares. Typically, a company raises finance by way of issuing fresh share capital which becomes part of its paid-up capital.
As per the amendment in the Companies Act, 2013, there is no requirement for a private and public company to hold a minimum paid-up capital which was earlier 1 lakh and 5 lakh respectively. They are free to choose their paid-up capital which can be as low as Rs. 20.
What is the difference between Authorized and Paid Up Capital
Companies issue their shares to raise capital for various purposes such as to fund their expansion, paying off debts, etc. Irrespective of the size of a company or the type of business, every company needs to classify its share capital under various categories in the financial statement.
The capital structure of a company is broadly classified into two categories – authorized share capital and paid-up share capital. Let us understand the meaning of these two terms and how they are different from each other.
Step 1: Vetting of MOA and AOA
A company must check its MOA and AOA about the limit of authorized capital. If the issue of shares is going to be beyond the specified limit in MOA then it has to increase its authorized capital. Before increasing, the company must check whether it is can do so legally as per the norms of association of the company. Altering AoA is one option to amend such provisions.
Alteration of AOA:
To alter the AOA, the company must take approval from the shareholders in an annual general meeting or extra-ordinary general meeting. Such altered AOA must be filed with MCA within 30 days from the date of the resolution.
Once the AOA is altered, it can proceed with further procedure to increase authorized capital.
Step 2: Holding Board Meeting
A board meeting must be arranged to take the approval of the board to increase authorized share capital. Further, to decide the date and time to call an AGM or EGM to take the shareholders’ approval. A notice for holding an AGM or EGM must be sent to all the shareholders as per the rules. A director must be authorized to file all the necessary forms with the MCA.
Step 3: Hold Shareholders Meeting
The company shall hold the AGM/EGM on the specified date and time to take the approval for an increase in authorized capital. An ordinary resolution must be passed in the meeting.
Step 4: Intimation to the ROC
After taking approval in shareholders meeting a company shall draft the altered MOA to increase authorized share capital. A company has to intimate about the same by filing form SH-7 with the MCA. The form must be filed in 30 days from the date of resolution. The documents required to file the said form are as under.
necessary to incorporate changes in AOA and MOA and put it up on website if any.
FAQs On Change Company Information
A company can intimate changes among Managing Director, Directors, Manager and Secretary of a company by filing eForm DIR-12 with Registrar of Companies (ROC) within 30 days (Event date + 30 days) from the date when such change takes place.
The following eforms need to be filed:
In case a company wants to change its object clause, it can do so by filling passing necessary resolution and file eForm MGT-14.
In case company has changed its registered office within local limits of the same city or place, intimation regarding the same has to be filed in Form INC-22.
Similarly, if company wishes to shift or change its registered office outside local limits of city, town or village, first eForm MGT-14 and then eForm INC-22 are required to be filed to Registrar of Companies (ROC) to give effect to such change.
In case, company wants to shift the registered office from one state to another state or from jurisdiction of one RoC to another, it needs to file following forms to give effect to such change:
A company can increase its authorized capital by filing eForm SH-7. Similarly, subscribed capital and paid up capital of the company can be increased on filing and approval of Form PAS-3 (Return of allotment of shares).
A public company can convert itself in to a private company by filing Form MGT-14 (Alteration of MOA and AOA) and then taking approval of Form INC-27.
A private company can convert itself into a public company by filing Form MGT-14 for registration of such resolution passed by the company (Alteration of MOA and AOA) and filing of Form INC-27.
In case you want to report repayment or satisfaction of registered charges, you need to file Form CHG-4 (satisfaction of charge). This form is applicable for both the type of charges.
A foreign company can change its information by filing Form FC-2 and Form FC-3. Form FC-2 is required when there is.
Alteration in the charter, statute or memorandum and articles of association Alteration in registered or principal office of the company in the country of incorporation.
Alteration in places of business in India of the company. Alteration in directors and secretary of a foreign company. Alteration in particulars of company authorized representative(s)
Similarly, Form FC-3 is required to give notice in case of -Annual accounts and list of places of business established in India by a foreign company
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