What is the difference between authorised share capital and paid-up capital?

Question

I am setting up a company and my accountant mentioned authorised capital and paid-up capital as separate figures. What do these mean and why does it matter? I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

What is the difference between authorised share capital and paid-up capital? is governed in India primarily by Companies Act 2013, Section 2(8), Companies Act 2013, Section 2(64) and Companies Act 2013, Section 61. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 2(8) defines authorised capital as the maximum share capital a company is permitted to issue as stated in its memorandum's capital clause.

Section 2(64) defines paid-up share capital as the aggregate amount actually received by the company against shares issued to shareholders.

A company cannot issue shares beyond its authorised capital and must first increase it under Section 61 by ordinary resolution before allotting further shares.

Government fees for incorporation and subsequent capital increases are linked to the authorised capital slab, making it a cost consideration at the planning stage.

Paid-up capital, not authorised capital, determines the actual funds available to the company and is reported in financial statements and MCA filings.

What to do next: 1) Estimate near-term funding needs before fixing the authorised capital figure; 2) File Form SH-7 to increase authorised capital when more shares need to be issued; 3) Ensure paid-up capital records match actual share application money received; 4) Reconcile capital clause figures with the register of members regularly.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Companies Act 2013, Section 2(8) carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.