Authorized Capital is the maximum ceiling of share capital a company is legally authorized to issue under its Memorandum of Association (Clause V). Paid-Up Capital is the actual portion of that capital already subscribed and paid for by shareholders into the company's bank account. Under current Indian law, there is zero minimum paid-up capital requirement to register a company.
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One of the most persistent misconceptions among new entrepreneurs is that incorporating an Indian Private Limited Company requires depositing ₹1 Lakh or ₹5 Lakhs in frozen bank reserves. In reality, modern Indian company law gives founders complete freedom over capital structuring. At D BIZ CONSULTANCY, our corporate finance team helps founders optimize authorized capital to minimize government fees while leaving room for investor equity.
Explore our dedicated Private Limited Company Registration Desk to plan your company's capital architecture.
1. Statutory Definitions Under Companies Act, 2013
The two terms are defined under Section 2 of the Companies Act, 2013:
| Metric | Statutory Definition | Purpose / Function | Regulatory Ceiling |
|---|---|---|---|
| Authorized Capital *(Section 2(8))* | The capital authorized by the memorandum to be the maximum amount of share capital of the company. | Establishes the constitutional ceiling on share issuance. | Can be increased anytime via EGM resolution & Form SH-7. |
| Paid-Up Capital *(Section 2(64))* | The aggregate amount of money credited as paid-up on the shares issued. | Actual cash deposited by subscribers into the corporate bank account. | Can equal but never exceed Authorized Capital. |
2. The Truth About Minimum Capital Requirements
Prior to 2015, Section 2(68) mandated a minimum paid-up capital of ₹1,00,000 for private companies and ₹5,00,000 for public companies.
The Companies (Amendment) Act, 2015 omitted this requirement entirely. Today:
- Statutory Minimum Capital: ₹ZERO.
- A company can be legally formed with an authorized capital of ₹10,000 and a paid-up capital of ₹2 (e.g. 2 shares of ₹1 each held by two co-founders).
- However, for commercial practicality, most startups incorporate with an Authorized Capital of ₹10,00,000 divided into 1,00,000 equity shares of ₹10 each, and an initial Paid-Up Capital of ₹1,00,000 (10,000 shares subscribed upon incorporation).
3. Central MCA Fee Exemption Slabs
To encourage entrepreneurship, the Ministry of Corporate Affairs provides a Zero MCA Filing Fee Concession for SPICe+ Part B incorporation for companies with Authorized Capital up to ₹15,00,000.
- Authorized Capital up to ₹15 Lakhs: Central ROC form fee is ₹0 (only nominal state stamp duty and PAN/TAN fees apply).
- Authorized Capital above ₹15 Lakhs: Progressive MCA fees of ₹300 to ₹500 per ₹10,000 of incremental capital apply.
- Kerala State Stamp Duty: Stamp duty on authorized capital is levied under the Kerala Stamp Act at progressive slab rates.
Consult our Corporate Advisory Desks in Trivandrum and Kochi for personalized guidance on equity vesting and capital expansion.
Frequently Asked Questions
Akash P R
Business Consultant10 Years+ Experience in Startup Consultancy, Direct Tax, Indirect Tax and Compliances • D BIZ CONSULTANCY
Business Consultant with 10 Years+ Experience in Startup Consultancy, Direct Tax, Indirect Tax and Compliances.