My friend is planning to start a company. How much is the minimum authorized capital required for the company? What is authorized capital of a company?
Under Company law, Authorized capital is also called as nominal or registered capital. The amount stated in its memorandum of association of a company limited by shares as its capital amount at the time of registration. Such amount is the maximum amount which the company is authorized to raise by issuing shares. The registration fee as per table in Schedule X of the Act, be charged based the capital amount quoted in the Memorandum of articles . Therefore, such capital is called registered capital. If the capital amount increased, the company required to pay the suitable fee to the Registrar office. The capital stated in its memorandum can also be altered upon paying the prescribed fee to the Registrar office. This capital amount will be divided into shares of equal denomination. Generally, the nominal capital is fixed based on the estimated future requirements of fund for the company. A company is not authorized to issue capital beyond its authorized capital. However, such authorized capital can be increased when required for the company, if there is a provision in the Articles of Association as per section 61 of the Act, 2013 i.e. the company should make sure, whether Article of Association authorizes the company to increase the capital. If articles of association not authorized, the company is required to alter the Article of association by following the procedure under Section 14 of Act, 2013, by which the clause related to authorized capital could be inserted. To increase the authorized share capital, an Extra-Ordinary General meeting to be conducted and pass the Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013.
As per Company Act, 2013, the minimum share capital required is Rs 1 lac for a private limited company and Rs 5 lacs for a public company.
Adv. Anitha Gutti