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Difference Between Authorized and Paid up Share Capital

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What is the Difference Between Authorized and Paid up Share Capital ?

Capital is a business' basic requirement and there are various sources via which it can be raised. The primary being equity share capital.Hear we define some measure difference between Authorized and Paid up Share Capital. For a sole proprietorship, the equity share capital is the capital invested by the proprietor, while for a partnership firm it is the capital invested by individual partners.

The term share capital is specifically used for companies because a company has a separate legal entity which allows the promoters to call for capital from public. In lieu of the money, equivalent value of shares of the company are allotted to them.

For instance, Infosys Ltd. needs money to open a plant but it doesn't want to borrow it from financial institutions, then it can get it from the public by rolling out an IPO. The people will subscribe for the shares and pay money for them.

What is Authorized Capital ?

A company can call for money from the public only if its Memorandum of Association (MOA) and Articles of Association (AOA) permit it. The Capital clause of an MOA lists information about the capital structure of a company.

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It tells about the maximum capital that a company can raise by allotment of shares to public. This is called Authorized Share Capital. If a company intends/ wants to raise more capital than authorized by MOA, then the Capital Clause needs to be altered as per provisions of Companies Act, 2013. 

What is Paid-Up Share Capital ?

As a general practice a company issues only some part of the authorized capital. That part is called Issued Capital. Out of this the percentage that is subscribed by public is called Subscribed Capital. Paid up-capital is that part of Subscribed Capital for which money is received from the subscribers.

Many a times people subscribe to shares but when the company calls for money they do not pay. The part for which payment is made, is called Paid-Up share capital.

Paid-up Share Capital is that portion of Authorized Capital that was paid, in full or part, by the subscribers of company's shares when an issue was made. Paid-Up capital is a small portion of authorized capital.

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