Understanding the difference between Authorized Share Capital and Paid-Up Capital is crucial for company compliance and financial planning.

📌 Key Differences Between Authorized Share Capital & Paid-Up Capital

1️⃣ AUTHORIZED SHARE CAPITAL

What is Authorized Share Capital?

• It is the maximum amount of share capital that a company is legally allowed to issue.
• It is mentioned in the Memorandum of Association (MOA) – Clause V.

💡 Example:
A company has an Authorized Share Capital of ₹10 crore but has only issued ₹2 crore worth of shares to shareholders. The company can still issue ₹8 crore more shares without increasing the limit.

✅ When to Increase Authorized Share Capital?

✔️ When the company plans to issue more shares (for investment, expansion, ESOPs, etc.).
✔️ Before issuing Bonus Shares or a Rights Issue, if the current Authorized Capital is insufficient.
✔️ If the company expects future fundraising rounds and wants flexibility.

❌ When to Avoid Increasing Authorized Share Capital?

❌ If the company does not need to issue new shares soon.
❌ If the existing Authorized Capital is already sufficient for expansion.
❌ If founders want to avoid extra MCA compliance.

📌 How to Increase Authorized Share Capital? (Step-by-Step Guide)

1️⃣ Check Current Authorized Capital – Found in MOA (Clause V).
2️⃣ Hold a Board Meeting – Pass a resolution to increase the capital.
3️⃣ Call an Extraordinary General Meeting (EGM) – Get shareholder approval.
4️⃣ Amend MOA (Clause V) – Update to reflect the new capital.
5️⃣ File MCA Forms:

• MGT-14 (Approval of special resolution).
• SH-7 (Application for increasing Authorized Capital).
  6️⃣ Pay MCA Filing Fees – Based on the increase in capital.

📌 Key MCA Forms: SH-7, MGT-14

2️⃣ PAID-UP CAPITAL

What is Paid-Up Capital?

• Paid-Up Capital is the actual amount received by the company from shareholders in exchange for shares.
• It cannot be more than Authorized Share Capital.

💡 Example:
If a company has Authorized Capital of ₹10 crore but has only issued ₹2 crore worth of shares, then:

• Authorized Capital = ₹10 crore
• Paid-Up Capital = ₹2 crore

✅ When to Increase Paid-Up Capital?

✔️ When the company raises funds by issuing new shares.
✔️ When the company wants to onboard new investors.
✔️ When the company issues Bonus Shares, ESOPs, or Rights Issue.

❌ When to Avoid Increasing Paid-Up Capital?

❌ If the company does not need immediate funding.
❌ If increasing Paid-Up Capital would lead to unnecessary dilution of founder holdings.
❌ If the company wants to use alternative fundraising methods (e.g., convertible debentures, loans, etc.).

📌 How to Increase Paid-Up Capital? (Step-by-Step Guide)

1️⃣ Check Authorized Capital – Make sure it is sufficient to allow new share issuance.
2️⃣ Board Resolution – Approve the issuance of new shares.
3️⃣ Shareholder Approval – Required for private placement or rights issue.
4️⃣ Receive Investment Money – Shareholders must pay for new shares.
5️⃣ Allot New Shares – Issue share certificates.
6️⃣ File MCA Forms:

• PAS-3 (Return of share allotment).
• PAS-4 (Offer letter to investors).

📌 Key MCA Forms: PAS-3, PAS-4

📌 Final Comparison Table

📌 Final Summary

✅ Authorized Share Capital is a legal limit, Paid-Up Capital is real money received from shareholders.
✅ Increasing Authorized Capital does NOT require money, but increasing Paid-Up Capital does.
✅ Before issuing new shares, ensure your Authorized Capital is high enough.

Would you like templates for board resolutions or MCA filings? 😊