Capital

In simple words, the total contributions made by people to the common stock of the

company is the capital of the company. Further, a share is the proportion of the
capital to which each member has entitlement. Remember, a share is not an amount
of money. It is an interest including different rights in the contract.

In this article, we will look at five ways in which the term capital is used in
Company Law: nominal capital, issued capital, subscribed capital, called up capital
and paid up capital.

Nominal or Authorized or Registered Capital

Section 2(8) of the Companies Act, 2013, defines Nominal Capital as the amount of
capital that the Memorandum of the company authorizes as the share capital of the
company. Hence, it is the registered amount authorized that can be raised by issuing
shares.

The company also pays stamp duty in this amount. Typically, you can calculate
nominal capital by taking into consideration the working and reserve capital needs
of the company.

Issued Capital

Issued capital is a part of the Authorized capital, offered by the company for the
subscription. This includes the allotment of shares. Section 2(50) of the Companies
Act, 2013, offers this definition. Further, it is mandatory for companies to disclose
its issued capital in the balance sheet (Schedule III of the Act).

Subscribed Capital

Section 2(86) of the Companies Act, 2013, defines Subscribed capital as the part of
the capital being subscribed by the members of the company. It is the number of
shares that the public takes.

Further, if the company states Authorized Capital in any communication like notice,

advertisement, official/business letter, etc., then it has to also specify subscribed and
paid up capital in equally conspicuous characters.

Also, Section 60 of the Act specifies that defaulters in this regard, the company and
all officers who default, will be fined around Rs. 10,000 and Rs. 5,000 respectively.
Called up Capital

According to Section 2(15) of the Companies Act, 2013, Called up Capital is the
part of the capital which the company calls for payment. This is the total amount
that the company calls-up on the issued shares.

Paid Up capital

Paid up capital is the part of called up capital actually paid or credited by

shareholders on the issued shares. Mathematically, Paid up capital = Called up
capital – Calls in Arrears.

Paid up capital represents the money that the company has not borrowed. Also, it is
the total amount of money that the company receives from shareholders in
exchange for shares of stock.