Authorised capital

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Roshni Garach (Querist)

27 February 2013 Dear all
Can a company issue shares more than its Authorised Capital , if yes then what is the litigation regarding the same???
Please explain me with this Example
Authorised capital -Rs 150 lks
Shares Previously issued for Rs 40 lks
Fresh shares issue for Rs 112 lks therefore total issued capital is equal to Rs 152 lks Is it possible to show the 2 lks(152 lks minus 150 lks) as share premium????

Dr. Rashid Mehmood, CPA, Ph.D

Dr. Rashid Mehmood, CPA, Ph.D (Expert)

28 February 2013 Dear Roshni

A company can not do so because:

1. whenever new shares are issued, the company has to report to security and exchange commission of the country - a statutory body looking after the corporate matters. this report contains the number of shares, face value, premium and total value of shares.

2. the amount exceeding the authorized capital cannot be booked as share premium if it is against the issuance of shares. because authorized capital is not only monitored by amount but also by shares.

3. therefore, the company wants to increase the capital can issue shares within the authorized available shares but at a higher price and the difference can then be booked as share premium.

4. if it is not possible to issue shares at higher of the face value then first increase the authorized capital through a simple process by amending MOA, AOA and filling an application to SEC. then issue shares from that authorized shares.

5. in case company violate the law, it is serious corporate offence and may lead to heavy fines and loss of integrity and repute.

Hoping it will suffice your concerns.

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