Authorised Capital, Private Limited Company Registration, Startup

Authorised Capital for Private Limited Company Registration

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Authorised Capital for Private Limited Company Registration

Many of the Entrepreneur’s starting a new private limited company are uncertain about the concept of authorised capital and are often times unsure on the amount of authorised capital they should start their new private limited company with. In this article, we answer one of the most frequently asked question from Entrepreneurs, how much authorised capital is required to start a new private limited company?

Authorised Capital Vs. Issued Capital

When a Private Limited Company is incorporated, the promoters of the company must decide on the amount of authorised capital for the company and the value of shares they will receive in return for their investment in the company. Authorised capital of a private limited company is the maximum value of shares a company can allot to its shareholders. Issued shares or outstanding shares on the other hand, is the amount of shares issued by the private limited company to its shareholders. The issued or outstanding share capital of a company can never exceed the authorised capital of a company.

Charges for Additional Authorized Capital

Currently, the Ministry of Corporate Affairs (MCA) charges a fee of Rs.5,000/- for allotting the minimum authorised capital of Rs.1 lakh for a private limited company. In case the private limited company requires additional authorised capital, fee for the additional authorised capital is charged as follows:

Minimum and starting authorised capital of Rs. 1 lakh: Rs.5000

  1. For each lakh of additional share capital from Rs.1 lakh to Rs.5 lakh, Rs.4,000 per lakh of Authorised capital.
  2. For each lakh of additional share capital from Rs.5 lakh to Rs.50 lakh, Rs.3,000 per lakh of Authorised capital.
  3. For each lakh of additional share capital from Rs.50 lakh to Rs.1 crore, Rs.1,000 per lakh of Authorised capital.
  4. For each lakh of additional share capital from Rs. Rs.1 crore, Rs.750 per lakh of Authorised capital.

If the promoters of a private limited company wish to issue shares commensurate to the value of investment in the Company, a significant fee would be payable to the Ministry of Corporate Affairs for increasing the authorised capital of the company.

Authorised Capital for Startups

Majority of the startups today are bootstrapped and are unable to pay a significant amount of fee to the Ministry of Corporate Affairs for incorporation of a company with an authorised capital commensurate to the investment in the company. Therefore, most promoters incorporate their company with the minimum required authorised capital of Rs.1 lakh and issue shares with a value of Rs.1 lakh or less to founding members. The rest of the capital invested by the founding members in the Private Limited Company is classified as either unsecured loan or share application money or share premium, thereby reducing the need to increase the authorised capital of the company during the startup and growth stages.

Once, the private limited company starts scaling-up operations and/or requires in the form of debt or equity, authorised capital of the company is raised and additional shares are issued to the founding members commensurate to their investment in the company. Therefore, it is acceptable for most startups to start their operations with the minimum authorised capital of Rs.1 lakh and then increase the authorised capital of the private limited company as the necessity for debt or equity funding arises.

For Private Limited Company Registration, visit IndiaFilings.com

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Comments (9)

d k dhingra

Apr 10, 2015 at 1:57 PM

we intend to ask
we forgot to raise our authorised capital in previous year

now we intend to raise the same retrospectively

pl advise the procedure

Reply

jagdish tete

Jul 01, 2015 at 4:35 PM

sir new company incorporation paid up capital one lac and authorised capital ten crore
please suggest how many stamp duty and moa & aoa fees pay to roc

Reply

IndiaFilings

Jul 01, 2015 at 5:06 PM

Dear sir,
Greetings from IndiaFilings.com, India’s premier online consulting co!!
Please provide your email address and contact number, so that we can ask our business adviser to call you.
Looking forward to work with you in the near future. Have a great day.
Thanks & Regards

Reply

Kunal

Apr 01, 2016 at 5:15 PM

What if i dont have 1 lakh capital while registration ?
Does i need to submit proof of 1lakh capital or i need to deposit in bank ??

Reply

Sumesh

Apr 06, 2016 at 11:56 AM

Hi kunal ,
of course you should need the proof for that , do you have any other doubts about registration please call our business advisors @ 04440247777

Reply

PARTHASARATHI SINHA ROY

Oct 18, 2017 at 12:11 PM

A foreign company wants to incorporation in India through FDI and the proposed name of the same is like ABC (Asia) PVT LTD. The number of director will be 3 persons (One is Indian & rest are foreigner). Please tell me the start of authorized share capital must be how much in INR & subsequently number of shares.

best regards,
Parthasarathi

Reply

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