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Microlesson · 5-min read

Authorised Capital and Called-Up Capital

# Authorised Capital and Called-Up Capital

## 1. Authorised Capital (Nominal/Registered Capital)

  • It is the maximum amount of share capital that a company is authorised to issue.
  • It is specified in the Memorandum of Association (MOA) - Capital Clause.
  • A company cannot issue shares beyond its authorised capital without first altering it.

## 2. Called-Up Capital

  • It is the part of the subscribed share capital that the company has called for payment from shareholders.
  • It represents the amount that the company has actually demanded from shareholders out of the issued/subscribed capital.

## Hierarchy of Share Capital

```

Authorised Capital

└── Issued Capital

└── Subscribed Capital

└── Called-Up Capital

└── Paid-Up Capital

```

## Key Definitions Comparison

TermMeaning
Authorised CapitalMaximum capital company can issue (stated in MOA)
Issued CapitalCapital offered to public/shareholders
Subscribed CapitalPortion of issued capital actually subscribed
Called-Up CapitalPortion of subscribed capital called for payment
Paid-Up CapitalPortion of called-up capital actually received
Uncalled CapitalSubscribed capital not yet called

Worked example

### Example 1

Example: ABC Ltd has authorised capital of ₹10 lakh (1 lakh shares of ₹10 each). It issued 80,000 shares which were all subscribed. The company called ₹6 per share. All shareholders paid except one holding 1,000 shares who paid only ₹4.

Solution:

  • Authorised Capital = ₹10,00,000
  • Issued/Subscribed Capital = 80,000 × ₹10 = ₹8,00,000
  • Called-Up Capital = 80,000 × ₹6 = ₹4,80,000
  • Paid-Up Capital = (79,000 × ₹6) + (1,000 × ₹4) = ₹4,78,000
  • Calls in Arrears = ₹2,000

⚠️ Common exam mistakes

  • Confusing authorised capital with issued or paid-up capital.
  • Believing called-up capital equals paid-up capital - it doesn't if there are calls in arrears.
  • Assuming authorised capital can be exceeded without alteration of MOA.
Bare-Act text Section 2(8) and Section 2(15) · Companies Act, 2013 · click to expand
Definitions given under Section 2 of the Companies Act, 2013: Section 2(8) defines authorised capital; Section 2(15) defines called-up capital.
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