# Key Definitions: Capital, Books & Charge

This lesson covers a cluster of definitions that recur throughout the Act — capital terms, record-keeping terms, and the meaning of 'charge'.

## 1. Capital-related definitions

### Section 2(8) – Authorised Capital / Nominal Capital

The capital that is authorised by the memorandum to be the maximum amount of share capital of the company.

It is the ceiling — actual issued capital can never exceed it without altering the MoA.

### Section 2(15) – Called-up Capital

That part of the capital which has been called for payment.

It is not the same as paid-up capital — called-up includes amounts asked for but not yet received (calls in arrears).

### Tying it together – the capital pyramid

```

Authorised Capital (ceiling per MoA)

Issued Capital (offered to subscribers)

Subscribed Capital (taken up by subscribers)

Called-up Capital (amounts called from subscribers)

Paid-up Capital (amounts actually received)

```

## 2. Books and records definitions

### Section 2(12) – Book and Paper / Book or Paper

Includes: books of accounts, deeds, vouchers, writings, documents, minutes and registers — maintained on paper or in electronic form.

### Section 2(13) – Books of Account

Includes records maintained in respect of:

1. All sums of money received and expended and matters in relation to which receipts/expenditure take place;

2. All sales and purchases of goods and services;

3. The assets and liabilities of the company;

4. The items of cost as may be prescribed under Section 148 (cost records).

## 3. Section 2(16) – Charge

A charge means an interest or lien:

created on the property or assets of a company or any of its undertakings or both;
as security;
and includes a mortgage.

Mortgage is a sub-set of charge (this 'includes mortgage' wording matters for Chapter VI – Registration of Charges).

## 4. Other quick definitions worth memorising

Section 2(3) – Alter / Alteration: includes additions, omissions and substitutions.
Section 2(5) – Articles: AoA as originally framed, or as altered, or as applied in pursuance of any previous company law or this Act.
Section 2(14) – Branch office: any establishment described as such by the company.

Worked example

### Example 1

Q. ABC Ltd has an authorised capital of Rs.10 crore. It has issued shares worth Rs.6 crore, of which Rs.4 crore has been called and Rs.3.5 crore actually received. What are the issued, called-up and paid-up capitals?

A. Issued capital = Rs.6 cr; Called-up capital = Rs.4 cr (the amount asked for from shareholders); Paid-up capital = Rs.3.5 cr; Calls in arrears = Rs.0.5 cr. Authorised capital remains the ceiling of Rs.10 cr.

### Example 2

Q. XYZ Ltd creates a mortgage on its factory land in favour of SBI. Is this a 'charge' under the Companies Act?

A. Yes. Section 2(16) defines 'charge' as an interest or lien created on the property or assets of a company as security, and expressly includes a mortgage. Therefore, this mortgage is a charge and must be registered under Chapter VI.

### Example 3

Q. A company stores all its sales invoices and ledgers in cloud-based software. Are these treated as 'books and paper' under the Act?

A. Yes. Section 2(12) covers books of accounts, vouchers, writings, documents, etc., maintained on paper or in electronic form. Cloud-stored records qualify.

⚠️ Common exam mistakes

Confusing 'called-up capital' with 'paid-up capital' — called-up includes calls in arrears.
Treating authorised capital as a description of money already raised — it is only a ceiling fixed by the MoA.
Excluding electronic records from 'books and paper' — Section 2(12) expressly covers electronic form.
Forgetting that 'charge' includes mortgage — leading to errors in registration of charges questions.
Omitting cost records prescribed under Section 148 from the definition of 'books of account'.
Treating 'alteration' narrowly as a substitution only — it also covers additions and omissions.

Bare-Act text Sections 2(8), 2(12), 2(13), 2(15) & 2(16) · Companies Act, 2013 · click to expand

Section 2(8) – "authorised capital" or "nominal capital" means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company. Section 2(12) – "book and paper" and "book or paper" include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form. Section 2(13) – "books of account" includes records maintained in respect of – (i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place; (ii) all sales and purchases of goods and services by the company; (iii) the assets and liabilities of the company; and (iv) the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section. Section 2(15) – "called-up capital" means such part of the capital, which has been called for payment. Section 2(16) – "charge" means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage.

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Section 2 – Capital, Books & Charge definitions (Authorised Capital, Called-up Capital, Book & Paper, Books of Account, Charge)

Worked example

⚠️ Common exam mistakes