Authorised Capital vs Paid-up Capital: What’s the Difference?

Authorised capital is the maximum share capital a company is allowed to issue, as stated in its Memorandum of Association. Paid-up capital is the amount shareholders have actually paid to the company for the shares issued. Paid-up capital can never be more than authorised capital.

Why it matters for registrations

When you go for private limited company registration, you pick an authorised capital and subscribe to shares up to that limit. Authorised capital decides how many shares you can issue later without amending the MOA. Paid-up capital shows how much money the owners have really put in, and banks, lenders and clients often look at it.

Where each figure is used

• Authorised capital: Clause V of the MOA, ROC fee and stamp duty calculations, and the ceiling for any new allotment.
• Paid-up capital: balance sheet, annual filings, bank and tender eligibility checks, and some registration thresholds.
• Both appear in the company’s master data on the MCA portal.

Key points

Think of authorised capital as the size of the bucket and paid-up capital as the water in it. A company can start with, say, a large bucket and a small amount of water. Many founders choose authorised capital a little higher than they need now, so a fresh round or an ESOP pool doesn’t force an immediate amendment.

Two other terms sit in between. Issued capital is what the company has offered to shareholders. Subscribed capital is the part they have agreed to take. Paid-up is the portion for which money has been received. If shares are partly paid, the unpaid part is a call that the company can make later.

When you run out of room, you must increase the authorised capital first. This needs the members’ approval and an amendment of the MOA, followed by a filing with the ROC. Only then can you issue more shares, and the issue is reported through share allotment and PAS-3 filing.

Common mistakes

• Trying to allot shares beyond the authorised capital. The allotment fails until the capital is increased.
• Setting authorised capital far above need and paying higher fees at the start.
• Mixing up subscribed and paid-up capital in the balance sheet.
• Not filing the allotment return after issuing shares.

Related guides: MOA (Memorandum of Association), Board resolution, MCA and ROC

FAQs

Can paid-up capital be higher than authorised capital?

No. Shares can only be issued within the authorised capital, so the authorised capital must be increased first.

Is there a minimum authorised or paid-up capital for a private company?

No minimum is prescribed for a private limited company under the current law. You can start with a small amount that suits your business.

Where do I find a company’s capital figures?

In the MOA, the latest balance sheet, and the company master data on the MCA portal.

Not sure how much authorised capital your plan needs? Talk to a Taxhint expert and we will size it with you.