What is the difference between authorised and paid-up capital?
What separates authorised, issued, subscribed, and paid-up share capital under the Companies Act, 2013: the ceiling the MOA sets, what shareholders actually pay in, and how to raise the authorised limit.
In this guide
Authorised capital is the maximum share capital a company can issue, set in the capital clause of its memorandum under section 4 of the Companies Act, 2013. Paid-up capital is the amount shareholders have actually paid for the shares issued to them. Authorised capital is a ceiling and can sit unused; paid-up capital is real money in the company. Raising authorised capital needs a members' resolution and a filing with the Registrar.
What are the four layers of share capital?
Share capital sits in four layers: authorised, issued, subscribed, and paid-up. Authorised capital is the memorandum ceiling. Issued capital is what the company has offered from that ceiling. Subscribed capital is what investors agreed to take. Paid-up capital is what they have actually paid. Each layer is a subset of the one above it.
The two that get confused are the outer and inner layers: authorised and paid-up. One is a permission, the other is real money received. The layers between them explain how a company moves from a permitted maximum to cash in hand.
What is authorised share capital?
Authorised capital is the maximum amount of share capital a company can issue, fixed in the capital clause of its memorandum under section 4 of the Companies Act, 2013. It is a legal ceiling, not money the company holds. A company can be authorised for a large amount and issue only a fraction of it.
Because authorised capital is a ceiling, it also sets how much room the company has to issue new shares without further action. Once issuances reach the authorised limit, the company must raise the limit before issuing more.
Where is authorised capital recorded?
In the capital clause of the memorandum of association, under section 4(1)(e) of the Companies Act, 2013. That clause states the amount of share capital with which the company is registered and how it divides into shares of a fixed amount. Section 2(8) of the same Act defines authorised capital as the capital authorised by the memorandum to be the maximum amount of share capital of the company.
What is paid-up share capital?
Paid-up capital is the amount shareholders have actually paid for the shares issued to them. It is the real capital the company has received and can use. The minimum paid-up capital requirement was removed by the Companies (Amendment) Act, 2015, so there is no prescribed floor for a private or public company.
Paid-up capital is what appears on the balance sheet as the capital the company has raised from members. It reflects money in, not permission to raise money.
Which thresholds are measured on paid-up capital?
Paid-up capital, not authorised capital, drives several Companies Act, 2013 tests. A small company under section 2(85) is defined by paid-up capital not exceeding the limit in that clause, read with turnover. Section 149(1) uses paid-up capital thresholds in the rules for appointing a woman director, and section 203 with rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 uses paid-up capital for key managerial personnel. Check the current figure in the rule, because the limits have been revised more than once.
How do authorised and paid-up capital differ?
Authorised and paid-up capital differ in what they represent and whether they can change without member action. The table sets them side by side.
| Point | Authorised capital | Paid-up capital |
|---|---|---|
| What it is | Maximum capital the company may issue. | Capital shareholders have actually paid. |
| Where it is set | Capital clause of the memorandum. | Shares issued and paid for. |
| Is it money in the company? | No, it is a ceiling. | Yes, it is received capital. |
| Can it exceed the other? | Always at least equal to paid-up. | Can never exceed authorised. |
How do I increase authorised capital?
- Check that the articles permit an increase in authorised capital, and alter them first if they do not.
- Pass the members' resolution to alter the capital clause of the memorandum.
- File the change with the Registrar of Companies in the prescribed form with the applicable fee and stamp duty.
- Issue shares up to the new authorised limit only after the increase is recorded.
Why is authorised capital set too high?
- Treating authorised capital as money the company holds, when it is only a ceiling.
- Trying to issue shares beyond the authorised limit without raising it first.
- Assuming there is still a minimum paid-up capital requirement, which was removed in 2015.
- Setting authorised capital far above need and paying higher slabbed MCA fees for no reason.
- Confusing subscribed capital with paid-up capital when shares are only partly paid.
Where are MCA capital fee changes notified?
Capital definitions sit in the Companies Act, 2013, and the fees and forms for altering capital move through MCA notifications. Complied AI keeps MCA updates in one feed so you can open the notification behind a fee or form change, then read section 4 and the capital definitions next to it when you need the exact wording.
Practical checks
Common questions
What is the difference between authorised and paid-up capital?
Authorised capital is the maximum share capital a company is permitted to issue, fixed in the capital clause of its memorandum under section 4 of the Companies Act, 2013. Paid-up capital is the amount shareholders have actually paid for shares issued to them. The first is a ceiling; the second is money the company has received.
Can paid-up capital exceed authorised capital?
No. Paid-up capital can never exceed authorised capital, because authorised capital is the ceiling on how much the company may issue. If a company wants to issue shares beyond the current authorised limit, it must first increase the authorised capital.
Is there a minimum paid-up capital for a private company?
The minimum paid-up capital requirement was removed by the Companies (Amendment) Act, 2015. A private or public company no longer needs a prescribed minimum paid-up capital, so a company can be incorporated with a small paid-up amount, subject to what its promoters choose.
What are issued and subscribed capital?
Issued capital is the part of the authorised capital the company has offered to shareholders. Subscribed capital is the part of the issued capital that investors have agreed to take. Paid-up capital is the part of the subscribed capital that has actually been paid. They sit between authorised capital and paid-up capital.
How do I increase authorised capital?
To increase authorised capital, the articles must permit it, the members pass a resolution to alter the capital clause of the memorandum, and the company files the change with the Registrar of Companies in the prescribed form with the applicable fee and stamp duty. Only after that can shares be issued up to the new limit.
Does authorised capital affect company fees?
Authorised capital affects the fees payable to the Registrar, because MCA filing fees under the Companies (Registration Offices and Fees) Rules, 2014 are slabbed by nominal share capital. A higher authorised capital can mean higher fees even if the paid-up capital is small, which is one reason companies set the authorised limit deliberately.
My authorised capital is Rs 1 lakh and I want to issue Rs 5 lakh of shares to an investor. What do I do first?
Increase the authorised capital before the allotment. Pass an ordinary resolution altering the capital clause under section 61(1)(a) of the Companies Act, 2013, then file Form SH-7 with the Registrar within 30 days under section 64(1), with fee and stamp duty. An allotment above the Rs 1 lakh ceiling is void until the increase is registered.
My CA says my paid-up capital is Rs 1 lakh but shareholders have only paid half. Which figure is right?
Paid-up capital is the amount actually received, so if half of a Rs 1 lakh subscription is paid, paid-up capital is Rs 50,000 and the balance is a call in arrears. Section 2(64) of the Companies Act, 2013 defines paid-up capital as the amount credited as paid up, including amounts credited without cash receipt. The unpaid balance is subscribed but not paid-up.
Does higher authorised capital make my company look stronger to a bank?
No. Authorised capital is a permission in the memorandum under section 2(8) of the Companies Act, 2013 and carries no money. A lender reads paid-up capital, reserves and net worth. Setting a high authorised capital only raises the slabbed MCA fee under the Companies (Registration Offices and Fees) Rules, 2014 while adding nothing to the balance sheet.
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This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 4 September 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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