Answer By law4u team
The difference between authorized capital and paid up capital relates to how much capital a company is allowed to raise and how much has actually been received from shareholders. These concepts are governed under the Companies Act, 2013. Authorized capital means the maximum amount of share capital that a company is permitted to issue to shareholders as stated in its constitutional documents such as the memorandum of association. It is simply the upper limit fixed at the time of company registration or later increased with legal procedure. The company may or may not issue the entire authorized capital. Paid up capital means the actual amount of money that shareholders have paid to the company for the shares that have been issued to them. It represents the real funds received by the company and used for business operations. In simple terms, authorized capital is the allowed limit while paid up capital is the amount actually collected. Paid up capital can never be more than authorized capital. If a company wants to issue more shares beyond the authorized limit, it must first increase the authorized capital by following the prescribed legal procedure. Authorized capital is mainly important for regulatory purposes and planning future fundraising, whereas paid up capital reflects the company’s real financial base and ownership contribution.
