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Introduction
One problem that arises when you consider launching a new company -- how much capital should be issued? The promoters who are also looking for online registration of a Company in Indiaare not excluded by this. The minimum capital requirements for a Private Limited Company with share capital are a constant source of confusion for the promoters.
The conflict starts when a nominal amount of money is required for the intended business. The amount of money needed to incorporate in this case is never clear, especially if the co-founders have limited resources.
Therefore, we will now talk about how much capital is needed to form a private limited company in India, OPC, Section 8 companies etc (except LLP). The Indian Companies Act, 2013, specifies the required for share capital to establish Private Limited Companies. The above-mentioned Act eliminates the need for a minimum paid-up capital, when the authorized capital is specified as Rs. 100,000. It is in the promoter’s best interest to be aware of these terms and types of capital before forming a company.
Types of capital
There are three categories—authorized capital, subscribed capital, and paid-up capital, which are used to classify the company's capital.
1. Authorized capital of a company
The total sum that a company can raise via the issuance of shares, both during registration and after incorporation, is known as the authorised capital of a Company.
The capital clause in the company's Memorandum of Association contains information about the authorised capital of any company.
During its existence, the company cannot raise capital by issuing shares in surplus of the specified number.
The Companies Act, 2013 mandate to maintain Rs 100,000 as authorised capital for incorporation of company in India.
The authorised capital may also be raised at anytime for Private Limited registration by complying with provision of the Companies Act, 2013. The approved capital determines the stamp duty and government fees that must be paid for a Private Limited Company, as well as any applications or documents that the company must submit. Therefore, it's advisable to avoid maintaining your company's authorised capital at a high level because it can change in the future.
2. Paid-up capital of a company
A company's paid-up capital is the real sum of money that is raised by issuing shares to the investors. As the company cannot issue shares over the allowed capital, the paid-up capital is always less than the authorised capital. The paid-up capital thereby acquired is frequently used to control the company's expenses.
When it comes to a Private Limited Company's minimum paid-up capital, earlier there used to be a requirement that it must have a capital of Rs.100,000. This would mean that the shareholders should spend at least 100,000 on buying the shares in order to start the company. However, the Companies Amendment Act, 2013 eliminated this requirement, making it possible for business owners to incorporate Private Limited companies without any obstacles.
3. Issued share capital of a company
A company can obtain capital from a variety of sources during its service life by issuing shares. The shares that are issued to offer allotment and subscription are considered part of the company's issued share capital. It is to be noted that the total number of shares "to be" issued and "already" issued will not exceed the authorised capital specified in the MOA's capital clause.
Conclusion
The type of company and operational needs determine how much capital is required for a company. Both the authorised capital and the paid-up capital must be declared during the online registration process of a Company in India.
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