It is the maximum amount of share that a company is authorized to have by its constitutional documents to issue to the shareholders. It is not necessary to issue the whole amount of the authorized capital, part of it can remain unissued. The amount of share that is issued to the shareholder is called the issued share capital of the company. To put in other words, an authorized capital is the one which is the maximum amount of value of securities that a company can legally issue to the shareholders. The Authorized capital needs to be specified in the Memorandum of Association(MOA).
Authorized capital is broadly divided into the:
It is the amount in a company which is funded by the shareholders. A paid up capital can never be more than an authorized capital. This capital is a reflection of how an equity funding is needed for a company to grow in the market. A company raises its financing with the help of the paid-up capital, it can be either in the form of Initial Public Offering(IPO) or an additional issue.
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