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Authorized Share Capital more commonly known as authorized capital is basically the maximum amount of share capital that a company can issue to shareholders. This amount varies from company to company and is subject to change but only with the approval of shareholders. Let’s just assume that a company’s authorized capital is Rupees one lakh then it automatically means that you can issue shares of up to Rupees one lakh. But since this authorized capital is subject to change it can be increased and decreased as and when required. Let’s say that a company’s authorized capital is Rupees 1 lakh but an investor wants to invest Rupees one Crore, in such scenario company can increase its authorized capital to one Crore. Discussed below is authorized share capital for company registration.
Guidelines for authorized capital.
Certain words can lead to change in the authorized capital of a company such as;
Rs. 5 Lakhs for using words like Hindustan, Bharat, India within the name of the company.
Rs. 10 Lakhs for words like Enterprise, Products, Business and Manufacturing within the name of the company.
Rs. 50 Lakhs for words like International, Global, Continental, Universal, Intercontinental, Asiatic, Asian within the name of the company.
Rs. 50 Lakhs for words like Bharat, Hindustan, India as the first word of the name of the company.
Rs. 1 Crore for using words like International, Global, Universal, Continental, intercontinental, Asiatic, Asia as the first word of the name of the company and words like Udhyog and Industry anywhere in the name of the company.
Rs. 5 Crore for using word Corporation anywhere in the name of the company.
Procedure to change the Authorized Share Capital of a company
A minimum fee of Rs. 5000 is to be paid to MCA if the authorized capital is the minimum amount of Rs. 1 lakh, As the amount of authorized capital increases the amount of fee required to be paid to MCA also increases.
For each lakh of additional share Capital, Rs 1 lakh to 5 lakhs; Charges per lakh of authorized Capital is Rs. 4000.
For each lakh of additional share Capital, Rs 5 lakh to 50 lakhs; Charges per lakh of authorized is Rs. 3000.
For each lakh of additional share Capital, Rs 50 lakh to 1 Crore; Charges per lakh of authorized Capital is Rs. 1000.
For each lakh of additional share Capital, Above Rs. 1 Crore; Charges per lakh of authorized Capital is Rs. 750.
But if we talk about startup entrepreneurs, they tend to keep a minimal amount of authorized capital of Rs. 1 lakhin order to avoid any extra spending. However big established companies tend to keep a high amount of authorized capital so as to avoid repeated interference of government organisation in their work again and again.
People often get confused between authorized share capital and issued share capital but you need to understand that they are two different things. Issued share capital is the amount of capital which is funded by company’s shareholders and it can never be more than authorized share capital.
Now that you have a clear understanding of what authorized share capital is and how it works for company registration, go and select a name for your company keeping in mind the above-stated facts.!
