Authorised Share Capital Increase

A company may need to increase its authorised share capital before issuing new equity shares and increasing paid-up capital. Authorised share capital is the total value of shares a company can issue, while paid-up capital is the total value of shares the company has issued. Paid-up capital can never exceed authorised capital. Hence, if a company having an authorised capital of Rs.10 lakhs and paid-up capital of Rs.10 lakhs would like to induct new shareholders, it can do so either by:

• Increasing authorised share capital and issuing new shares. (or)
• Transferring shares from existing shareholders to the new shareholders.

In most cases, new shares are issued and authorised capital is increased.