Clause V, MoA · Companies Act, 2013
Authorised Share Capital - What It Means and Why the Limit Matters
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Authorised share capital is the maximum value of shares a company is legally permitted to issue, as fixed in Clause V (the capital clause) of its Memorandum of Association. It is a ceiling, not a target - most companies never issue shares up to this limit, and that is normal. Confusing authorised capital with paid-up capital (what shareholders have actually paid) is one of the most common mistakes founders make when reading a company's financials or planning a fundraise. This page explains the concept clearly and helps you figure out whether your authorised capital is set correctly for where your company is headed - if you need to actually change the limit, see our change in share capital service.
- What It Represents
- Ceiling, not target
- Location in MoA
- Clause V
- Under Companies Act, 2013
- No max limit
- Advisory Fee
- From ₹2,999 + GST
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Key facts
The key facts, in one place
Everything a founder usually has to piece together from five different pages, in one place.
- Defined in
- Memorandum of Association, Clause V
- Also called nominal capital or registered capital
- Governing law
- Companies Act, 2013
- Sections 2(8), 4 and 61-64
- Minimum requirement
- No statutory minimum
- Since the Companies (Amendment) Act, 2015 removed the earlier minimum paid-up capital rules
- Can it be changed?
- Yes, by special resolution
- See our Change in Share Capital service for the increase/decrease procedure
- Relationship to paid-up capital
- Paid-up capital ≤ Authorised capital, always
- A company can never have more paid-up capital than its authorised limit
- Stamp duty relevance
- Higher authorised capital can mean higher registration stamp duty
- State-dependent, factor this in when setting the initial limit
- Advisory fee from
- ₹2,999
- Review of your current capital structure and recommendations
What is authorised share capital?
Authorised share capital - sometimes called nominal capital or registered capital - is the maximum amount of share capital that a company is permitted to issue to shareholders, as stated in Clause V of its Memorandum of Association (MoA). Think of it as a ceiling the company sets for itself at incorporation, not a target it has to reach. A company with an authorised capital of ₹10 lakh has simply given itself the legal room to issue shares worth up to ₹10 lakh in total, whenever it chooses to.
This is the single most misunderstood figure in a company's capital structure. Authorised capital is not the same as the money the company actually has, the value of shares it has actually issued, or what shareholders have actually paid. A company can be authorised for ₹1 crore in share capital and have issued and received only ₹1 lakh of it - the remaining ₹99 lakh is simply unused headroom that the company can draw on later, by allotting more shares, without needing shareholder approval for the amount itself (though it will still need approval for each specific allotment).
Since the Companies (Amendment) Act, 2015, there is no statutory minimum authorised capital requirement for private or public companies in India - earlier rules that mandated a minimum of ₹1 lakh (private) or ₹5 lakh (public) have been removed. That said, most companies still set an initial authorised capital in a sensible range, because increasing it later means a formal ROC filing (Form SH-7) and, in most states, additional registration stamp duty.
Authorised vs issued vs subscribed vs paid-up share capital
These four terms describe different stages of the same capital, and the confusion between them is extremely common. Here is how they relate, from largest (the ceiling) to smallest (what's actually collected).
Authorised Capital
Maximum capital the company may ever issue, per the MoA
Issued & Subscribed Capital
Capital actually offered to shareholders (issued) and agreed to be taken up (subscribed)
Paid-Up Capital
Capital shareholders have actually paid for the shares allotted to them
| Aspect | Authorised Capital | Issued & Subscribed Capital | Paid-Up Capital |
|---|---|---|---|
| What it means | Maximum capital the company may ever issue, per the MoA | Capital actually offered to shareholders (issued) and agreed to be taken up (subscribed) | Capital shareholders have actually paid for the shares allotted to them |
| Where it's recorded | Memorandum of Association, Clause V | Register of members, annual return (MGT-7) | Balance sheet, annual return |
| Can it exceed the previous column? | N/A - this is the ceiling | Cannot exceed authorised capital | Cannot exceed issued & subscribed capital |
| Changed by | Special resolution + Form SH-7 | Board/shareholder resolution for each allotment (Form PAS-3) | Automatically, as calls are made and paid |
| Typical relationship | Drawback: Largest figure | Equal to or less than authorised capital | Advantage: Usually equal to issued & subscribed capital in Indian private companies (partly-paid shares are uncommon) |
In most Indian private companies, issued, subscribed, and paid-up capital are the same figure because shares are typically issued as fully paid-up in one go. Authorised capital is usually set higher, to leave room for future issuance.
Bizeneed visual guide
Authorised Share Capital - What It Means and Why the Limit Matters
Understand authorised share capital - the maximum share capital your company can issue under its MoA - and how it differs from issued, subscribed, and paid-up capital. Advisory from ₹2,999.
- 1Understand requirement
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Eligibility
Who should understand their authorised share capital?
This isn't a filing you do repeatedly - it's a concept every founder and director should understand correctly, because it affects real decisions.
- Founders incorporating a new company, deciding what authorised capital figure to start with
- Existing companies planning a fundraise, who need to check if there's enough headroom for the new investor's shares
- Directors preparing for board meetings or investor due diligence, who need to explain the company's capital structure accurately
- Anyone reading another company's MoA, balance sheet, or ROC filings and trying to make sense of the different capital figures shown
- Companies considering ESOP pools, who need authorised capital headroom reserved for future option exercises
- Businesses reviewing whether their authorised capital is unnecessarily high (and costing more in registration stamp duty) or too low (blocking a planned allotment)
Documents
What we look at during an authorised capital review
2 required · 2 if applicable
Email me the explainerCommon to every entity
- Certificate of Incorporation and current Memorandum of Association (MoA)Required
- Latest annual return (Form MGT-7 / MGT-7A) showing current issued and paid-up capitalRequired
- Details of any planned fundraise, ESOP pool, or share issuanceIf applicable
- Prior SH-7 filings, if authorised capital has been changed beforeIf applicable
Get a plain-language explainer on capital types as a PDF
A one-page reference on authorised, issued, subscribed, and paid-up capital.
Process
How we help you get your capital structure right
This is advisory, not a filing - our job is to make sure you understand where you stand and what (if anything) you need to do next.
Review your current MoA and ROC filings
We pull your Clause V authorised capital figure and compare it against your current issued, subscribed, and paid-up capital from your latest annual return.
Map your plans against your headroom
If you're raising funds, hiring against an ESOP pool, or planning a bonus issue, we calculate whether your existing authorised capital has enough room, or whether it will need to be increased first.
Explain the numbers in plain language
Many founders have never had someone walk them through the difference between these capital figures - we do that clearly, using your company's actual numbers, not generic examples.
Recommend next steps
If your authorised capital needs to change, we hand you off to our Change in Share Capital service for the SH-7 filing. If you just needed clarity, that's the end of the engagement.
Authorised share capital itself has no annual filing or renewal - there's nothing to 'do' with it unless you want to change the limit or use the headroom to issue shares. This page and advisory service exists because the concept is so often misunderstood, not because there's a recurring compliance requirement attached to it.
Pricing
How much does an authorised capital advisory review cost?
There is no government fee for understanding your capital structure - our fee covers the review and explanation. If you decide to change your authorised capital, that's a separate filing.
Quick Clarity Call
For founders who just need the concept explained against their own numbers
₹2,999 + GST
- Review of current MoA capital clause
- Explanation of authorised vs paid-up capital
- 30-minute CA consultation
Most popular
Capital Structure Review
For companies planning a fundraise or ESOP pool
₹4,999 + GST
- Everything in Quick Clarity Call
- Headroom calculation against your fundraise/ESOP plan
- Written recommendation
Review + Change Filing Bundle
Review plus the Form SH-7 increase, if needed
₹6,999 + GST
- Everything in Capital Structure Review
- Special resolution drafting
- Form SH-7 filing (if increase is needed)
Full fee breakdown
| Particulars | Government fee | Professional fee |
|---|---|---|
| Authorised capital advisory/review | N/A - no government fee for advice | From ₹2,999 + GST |
| Increase authorised capital (if needed) | As per MCA fee schedule + state stamp duty | From ₹4,999 - see Change in Share Capital + GST |
| MoA Clause V amendment (bundled with SH-7) | Included above | Included above |
Prices exclude GST. GST at the applicable rate is added to your invoice.
Not included in any tier:
- The actual Form SH-7 filing to change authorised capital (separate service, linked below)
- State registration stamp duty on any capital increase
- Share allotment against the increased capital (separate service)
Benefits
Why getting your authorised capital right matters
Avoids fundraising delays
- Knowing your headroom before term sheet negotiations means you're not caught mid-round needing an emergency SH-7 filing
- Investors and their counsel will check this figure during due diligence - having a clean answer ready builds confidence
Avoids unnecessary cost
- Setting authorised capital far higher than you'll realistically use can mean paying more registration stamp duty than necessary in some states
- Understanding the concept avoids the reverse mistake too - setting it too low and needing a rushed, costly amendment later
Clarity for compliance and reporting
- Correctly distinguishing authorised from paid-up capital avoids errors in annual filings (MGT-7) and financial statements(Companies Act, 2013, Section 92)
Why Bizeneed
Why get capital structure advice from us
- We explain the concept using your company's actual MoA and filings, not textbook examples
- Practical recommendations tied to what you're actually trying to do - fundraise, ESOP pool, or general planning
- Direct handoff to our Change in Share Capital service if an actual SH-7 filing is needed, with no re-explaining your situation to a new team
- CA-reviewed advice, not a call-centre script
- No pressure to file anything - if your capital structure is already fine, we'll tell you that
FAQ
Frequently asked questions
Authorised share capital is the maximum value of shares a company is legally permitted to issue, as fixed in Clause V (the capital clause) of its Memorandum of Association. It is a ceiling the company sets for itself, not the amount it has actually issued or received.
No. Authorised capital is the maximum limit allowed under the MoA. Paid-up capital is the amount shareholders have actually paid for shares that have been issued to them. Paid-up capital can never exceed authorised capital, but it is very often lower.
There is no statutory minimum since the Companies (Amendment) Act, 2015 removed the earlier minimum requirements of ₹1 lakh for private companies and ₹5 lakh for public companies. You can register a company with any authorised capital amount you choose.
No, the Companies Act, 2013 does not prescribe an upper limit. A company can set its authorised capital as high as it wants, though higher authorised capital can mean higher registration stamp duty in some states.
It is stated in Clause V of the Memorandum of Association (MoA), and also appears in the company's annual return (Form MGT-7) and in ROC records accessible through a company search.
No. Total issued share capital can never exceed authorised share capital. If a company wants to issue more shares than its current authorised capital allows, it must first increase authorised capital through a special resolution and Form SH-7 filing.
Issued capital is the value of shares the company has offered to investors. Subscribed capital is the portion of that offer which investors have actually agreed to take up. In most private company allotments in India, issued and subscribed capital are the same figure.
Paid-up capital is the amount shareholders have actually paid the company for the shares allotted to them. In most Indian private companies, shares are issued as fully paid-up immediately, so paid-up capital usually equals subscribed capital.
To leave room for future growth - additional funding rounds, ESOP pools, or bonus issues - without having to go through a formal capital increase (special resolution and Form SH-7) every time new shares need to be issued.
No, there is no annual fee or renewal requirement tied to authorised capital itself. It only involves a cost (government fee and, in most states, stamp duty) at the time it is set at incorporation or changed later.
Check Clause V of your Memorandum of Association, or look up your company on the MCA portal or through a ROC company search - the authorised capital figure is part of the public master data for every registered company.
Yes, a company can reduce its authorised capital through a special resolution and Form SH-7 filing, typically when the existing limit is far higher than the company will ever realistically use. See our Change in Share Capital service for this procedure.
No. Increasing authorised capital only raises the ceiling - it does not by itself create or allot any shares. A separate allotment process (board/shareholder approval and Form PAS-3) is required to actually issue shares against the increased capital.
Investors check whether the company has enough authorised capital headroom to accommodate the new shares being issued to them as part of the funding round. If there isn't enough headroom, the company must increase it before the round can close.
It's relevant for OPCs, which are companies with share capital and follow the same MoA structure. LLPs do not have 'share capital' in this sense - they have contribution from partners instead, which works differently.
Written by Bizeneed Research Team, Service information
Last updated 9 September 2026
Sources
This page explains authorised share capital as a general concept for informational purposes. It is not a substitute for reviewing your company's specific Memorandum of Association and filings with a qualified professional before making capital structure decisions.
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