The difference between authorized capital and issued capital is that authorized capital is the maximum share of capital that is raised by the company from the public by issuing them with shares while on the other hand issued capital is a fraction of authorized capital which is issued to the public as a token.
Authorized capital is the amount of share capital with which a company identifies itself with the registrar of companies in the memorandum of association. It is, therefore, the maximum amount of capital that can be shared in the future. It is also a nominal capital since it is not the actual amount raised by a company.
On the other hand, the issued capital is a fraction of the authorized capital indicated in the memorandum as a share in the form of cash or any other form of asset. A company does not share its whole portion of shares to the public, therefore, the part of authorized capital that is shared is what is called issued capital.
|Parameters of Comparison||Authorized Capital||Issued Capital|
|Meaning||Amount of capital raised from the public by issuing shares||Fraction of authorized capital shared with the public|
|Based on||Present and future needs of a company||Present needs of a company|
|Registration fees||Basis of registration fees||Not a basis for registration fees|
|Memorandum of association||To make any changes, MoA has to be altered||To make any changes, MoA does not have to be altered.|
|Disclosure||Must be disclosed in the memorandum of association||Does not have to be disclosed in the MoA|
What is Authorised Capital?
It is the maximum amount of capital that is raised by a company from the public by issuing them shares. It is a form of maximum interest that a company acquires by offering shares to the public.
This capital is divided into shares with which its amount is determined by the shareholders. It is the capital that a company is allowed to raise and not more than that unless the capital clause is altered as per the company’s act of 2013.
It is a registered capital and sets a limit for the maximum capital that can be raised by a company and it is a nominal capital for it is not the actual capital that is raised by a company. It is divided into different share values depending on the portion of the shareholders.
In making changes to the authorized capital, a legal procedure is followed and approval is done by relevant authorities. Therefore, the amount of authorized capital dictated in the memorandum of association is what is followed until changes are requested.
It is fixed by a company’s shareholders and it is not subscribed to and the time the company is being incorporated. It is not fully authorized to the public so additional capital (profit) can be raised in the future.
What is Issued Capital?
It is a fraction of the authorized capital that is shared with the public from time to time as a subscription. It can be settled in cash or any other form of asset depending on how it is stated in the memorandum of association of the companies.
A company does not offer its entire share of the authorized capital. Only part of it is shared with the shareholders and investors as a subscription. Therefore, that part of authorized capital that is shared with the public is what is called issued capital.
For it is not a must for a company to share its authorized capital at go, the company raises additional capital (issued capital) whenever there is any need for additional funding (fraction of authorized capital). The amount of issued capital cannot exceed the amount of authorized capital.
Issued capital includes shares allocated to the; general public, signatories to the memorandum of association, shares termed as bonuses, and vendors for consideration other than cash. Shares offered to the public but not subscribed by the public are not included in the issued capital.
Main Differences Between Authorized Capital and Issued Capital
- Authorized capital refers to the face value (amount started in the share certificate) of the shares that a company is allowed to issue by its memorandum of association whereas issued capital is raised by a company by issuing shares to the public (profit).
- The amount of stamp duty paid is based on the authorized capital that is shared while issued capital does not form the baseline for the calculation of stamp duty.
- The authorized capital is mandatory to be disclosed in the memorandum of the association during the incorporation of the company, conversely, there is no disclosure requirement at the time of incorporation with issued capital.
- The registration fees that are paid by a company to the government are based on the authorized capital while on the other hand the registration fees are not based on the issued capital.
- The decision based on the authorized capital to be shared caters to the present and future needs of the company while only the present needs are put under consideration during the issuing of the issued capital.
- Authorized capital must be disclosed in the memorandum of the association while issued capital does not have to be disclosed in the memorandum of association for it is only but a fraction of the authorized capital.
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