Quick answers
- Authorised capital — the maximum share capital a company is allowed to issue, fixed in the MOA.
- Paid-up capital — the portion of issued capital shareholders have actually paid for.
- Both are mandatory — every company must declare both at incorporation in the SPICe+ form.
- Different limits — authorised capital is a ceiling; paid-up is the money actually in the bank.
- Increase via SH-7 — raising authorised capital requires a board/shareholder resolution and Form SH-7.
What is authorised capital?
Authorised capital, also called nominal or registered capital, is the maximum value of share capital a company is permitted to issue to its shareholders. It is fixed by the capital clause of the Memorandum of Association under Section 4(1)(e) of the Companies Act, 2013.
A company cannot issue shares beyond its authorised capital without first amending the MOA and filing Form SH-7 with the Registrar of Companies.
What is paid-up capital?
Paid-up capital is the amount of money actually received by the company from shareholders against the shares issued to them. It cannot exceed the authorised capital and need not equal it.
Since the Companies (Amendment) Act, 2015 removed the minimum paid-up capital requirement, a company can technically be incorporated with as little as Rs 2 of paid-up capital.
Key terms explained
- Issued capital: The portion of authorised capital actually offered to subscribers.
- Subscribed capital: The part of issued capital that shareholders have agreed to take.
- Called-up capital: The amount the company has demanded from shareholders so far.
- Form SH-7: The MCA form used to notify the ROC of an increase in authorised share capital.
Authorised vs paid-up capital at a glance
| Feature | Authorised capital | Paid-up capital |
|---|---|---|
| Meaning | Maximum that can be issued | Amount actually received |
| Set in | MOA, capital clause | Share allotment records |
| Upper limit | Decided by company | Cannot exceed authorised |
| Form to change | SH-7 | Share allotment via PAS-3 |
| Stamp duty | Levied on increase | Not directly |
How the two interact in practice
At incorporation, founders typically set authorised capital at Rs 1-10 lakh and paid-up capital equal to the value of shares subscribed in the MOA — often just a few thousand rupees.
Later, when raising a funding round, the company first increases authorised capital via SH-7 if needed, then allots new shares to investors and increases paid-up capital accordingly via PAS-3.
Common mistakes to avoid
- Confusing authorised with invested capital — authorised is just permission, not money.
- Setting authorised capital too low — every increase costs ROC fees and stamp duty.
- Issuing shares beyond authorised limit — any such allotment is void.
- Forgetting Form PAS-3 — every fresh allotment must be filed within 30 days.
Penalties and consequences
Allotment of shares beyond authorised capital is void, and directors signing such allotments can face personal liability under the Companies Act, 2013.
Failure to file Form PAS-3 for an allotment within 30 days attracts a penalty of Rs 1,000 per day, up to Rs 25 lakh on the company, under Section 39.
Key takeaways
- Authorised capital is the ceiling fixed in the MOA; paid-up is real money received.
- Paid-up cannot exceed authorised — increase authorised first via SH-7.
- There is no minimum paid-up capital since 2015.
- Every increase in authorised capital attracts ROC fees and state stamp duty.
- Every share allotment must be filed in PAS-3 within 30 days.
Frequently asked questions
- What is the difference between authorised and paid-up capital? Authorised capital is the maximum a company can issue; paid-up is what shareholders have actually paid in.
- Can paid-up capital be more than authorised? No. Paid-up can never exceed the authorised capital fixed in the MOA.
- What is the minimum paid-up capital? There is no statutory minimum since the 2015 amendment.
- Authorised aur paid-up capital me kya farak hai? Authorised ek upper limit hai jo MOA me likhi hoti hai; paid-up wo paisa hai jo shareholders ne actually company ko diya.
- How do I increase authorised capital? Pass a board and shareholder resolution, alter the MOA's capital clause, and file Form SH-7 with the ROC within 30 days.
- Is stamp duty payable on authorised capital? Yes — both at incorporation and on every increase, at the rate set by the state where the registered office is located.
- What is the penalty for not filing PAS-3? Rs 1,000 per day of default, capped at Rs 25 lakh on the company under Section 39.
- Does authorised capital affect company valuation? No — it is merely a legal ceiling; valuation depends on equity, performance and growth, not on authorised capital.
About the author
Gaurav
Senior Advisor at Regikart. Want to discuss this in the context of your business?
