Understanding the concept of authorised capital is crucial for anyone involved in business, particularly in India. Authorised capital, often referred to as registered capital or nominal capital, defines the maximum amount of share capital a company is legally allowed to issue to its shareholders. This article will delve into the meaning of “authorised capital meaning in Hindi,” exploring its significance, implications, and related concepts.
Understanding “Authorised Capital Meaning in Hindi”
In Hindi, authorised capital is referred to as “अधिकृत पूंजी” (adhikrit punji). “अधिकृत” (adhikrit) means authorised, and “पूंजी” (punji) means capital. So, अधिकृत पूंजी literally translates to authorised capital. This represents the maximum value of shares a company can issue. It’s important to remember that authorised capital doesn’t necessarily reflect the actual funds a company has raised. It merely sets the upper limit for the company’s fundraising potential through equity. Understanding this difference is vital for making informed business decisions.
Significance of Authorised Capital
Authorised capital plays several significant roles in a company’s lifecycle. Firstly, it signifies the company’s size and potential to investors and creditors. A higher authorised capital can project a stronger image of financial stability and growth prospects. Secondly, it provides flexibility for future fundraising. By setting a higher limit, the company avoids the need for frequent revisions to its memorandum of association whenever it needs to issue more shares. Lastly, authorised capital influences registration fees and stamp duty payable during company incorporation.
Difference Between Authorised, Issued, and Paid-up Capital
It’s crucial to distinguish between authorised capital and other types of share capital, namely issued capital and paid-up capital. Issued capital is the portion of the authorised capital that the company has actually offered to its shareholders. Paid-up capital, on the other hand, represents the part of the issued capital that shareholders have paid for. Thus, paid-up capital is always less than or equal to issued capital, which in turn is always less than or equal to authorised capital.
How to Increase Authorised Capital in India
Increasing authorised capital involves a formal process that requires a resolution by the shareholders and filing of necessary documents with the Registrar of Companies (ROC). The process generally involves holding a board meeting to pass a resolution, followed by an extraordinary general meeting (EGM) to approve the increase. After obtaining shareholder approval, the company must file Form SH-7 along with the amended Memorandum of Association with the ROC.
Implications of Choosing the Right Authorised Capital
Choosing the right authorised capital is crucial for a company’s financial planning. A too-low authorised capital can restrict future growth and require frequent revisions, while a too-high authorised capital can lead to unnecessary costs and complexities. Therefore, companies should carefully consider their current and future needs, industry benchmarks, and associated costs when determining their authorised capital.
Conclusion
Understanding “authorised capital meaning in Hindi” (अधिकृत पूंजी) is essential for anyone venturing into the Indian business landscape. It not only provides a legal framework for raising capital but also signals a company’s financial capacity and growth potential. By understanding the nuances of authorised capital, including its relationship with issued and paid-up capital, businesses can make informed decisions and lay a solid foundation for their financial future.
FAQ
- What is the maximum authorised capital a company can have in India? There is no prescribed maximum limit for authorised capital in India.
- Can a company decrease its authorised capital? Yes, a company can decrease its authorised capital through a prescribed legal process involving shareholder approval and filing with the ROC.
- What are the consequences of exceeding authorised capital? A company cannot legally issue shares exceeding its authorised capital. Doing so would be a violation of the Companies Act.
- Is authorised capital mentioned in the balance sheet? Authorised capital is not directly reflected in the balance sheet. The balance sheet shows issued and paid-up capital.
- How often can a company change its authorised capital? There is no restriction on the frequency of changes, but each change involves a formal process.
- What is the difference between authorised capital and subscribed capital? Subscribed capital is the portion of the issued capital for which shareholders have committed to pay. It can be equal to or less than the issued capital.
- Is it mandatory to have a high authorised capital? No, it’s not mandatory. The appropriate level depends on the company’s specific needs and plans.
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