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 would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Companies Act 2013, Section 2(8) is the starting point for this corporate law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

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 this means for you: 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.

Where the facts are disputed, what usually decides a authorised capital vs paid-up capital matter is the paper trail — dated complaints, acknowledgments and written replies under Companies Act 2013, Section 2(8). 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 corporate law.