Authrised Capital

Context

The government has raised the authorised capital of FCI from ₹10,000 crore to ₹21,000 crore to bolster its operational capabilities and fulfil its mandate effectively.

Authorised Capital

Authorised capital, also known as registered capital or nominal capital, refers to the maximum amount of share capital that a company is allowed to issue to its shareholders, as per its constitutional documents. It essentially sets a limit on the company’s ability to raise funds through the issuance of shares.

• Specified in the Memorandum of Association (MOA): The authorised capital is specified in the company’s MOA, which is a fundamental document filed during the incorporation process.

• Maximum limit: It represents the maximum amount of capital that the company can raise through shares. Companies cannot issue shares beyond this limit without going through a legal process to increase it.

• Flexibility: While it sets a limit, companies often don’t issue all the authorised capital at once. They can issue shares in stages as needed.

• Not the same as paid-up capital: Authorised capital is different from paid-up capital, which refers to the amount of capital that shareholders have actually paid for the shares they hold.

• Importance: Authorised capital serves several purposes, such as:

• Protecting creditors: It provides a level of assurance to creditors about the company’s potential liability.
• Maintaining control: It can help existing shareholders maintain control of the company by limiting the issuance of new shares.
• Raising capital: It allows the company to raise additional capital in the future if needed. 

  Here are some additional points to consider:

  • The amount of authorised capital can vary depending on the size and nature of the company.
  • The process for increasing authorised capital typically involves shareholder approval and regulatory filings.
  • Some countries have specific requirements for the minimum amount of authorised capital that a company can have.