Companies Act Section 2(64) Paid-up Share Capital

Paid-up Share Capital Section 2 (64)

Paid-up Share Capital represents the portion of authorized share capital that shareholders have fully paid for in cash or through other valid considerations, such as assets or services contributed to the company.

Key Points:

1. Authorized Share Capital:

Authorized Share Capital refers to the maximum amount of capital that a company is authorized to raise by issuing shares to its shareholders.

It is specified in the company’s memorandum of association (MoA) and can be increased or decreased by following prescribed procedures under the Companies Act.

2. Issued Share Capital:

Issued Share Capital is the portion of authorized share capital that the company has issued or allocated to shareholders through the issuance of shares.

It represents the total value of shares actually issued by the company.

3. Paid-up Share Capital:

Paid-up Share Capital is the amount of money that shareholders have paid to the company in exchange for the shares issued to them.

It reflects the actual capital available to the company for its operations and investments after deducting the amount not yet received from shareholders for shares issued (if any).

4. Importance and Use:

Paid-up Share Capital determines the financial strength and capacity of the company to undertake business activities, make investments, and meet financial obligations.

It influences the company’s ability to attract investors, obtain loans, and demonstrate financial stability to stakeholders and regulatory authorities.

Calculation and Compliance:

Calculation: 

Paid-up Share Capital is calculated by multiplying the number of issued shares by their respective face value or issue price and summing up the amounts paid by shareholders for those shares.  

Disclosure: 

Companies are required to disclose their paid-up share capital in financial statements, annual reports, and regulatory filings to provide transparency about their financial structure and shareholder contributions.

Legal Framework:

Companies Act, 2013: 

The Act mandates companies to maintain accurate records of their share capital, issue shares in compliance with statutory requirements, and ensure proper disclosure of paid-up capital in financial statements.  

Regulatory Compliance: 

Companies must adhere to procedural requirements for issuance of shares, receipt of payment, and reporting of changes in share capital to regulatory authorities such as the Ministry of Corporate Affairs (MCA).