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Authorised capital

P Kumar (CEO) (30 Points)

18 January 2015

I have Pvt ltd company registered in March 2012. Presently I have 20 lakh authorised capital.

I put approx 20 lakhs in it. I need to invest more in it. Do I need to increase authorised capital.

I am planning to approch angel investor/VC. I am giving an example - Suppose VC will invest 1 crore then I would have to increase authorised capital by 1 crore.

I am confused as because - Flipkart raised fund from VC 2 Billion $ in 2014 still its authorised capital is 150 crore approx. Similarly yatra.com raised many rounds of funding by VC still its authorised capital is 10 crore only.

Plz give me clear insight in this respect.

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CS Mitesh Mehta (Company Secretary) (17139 Points)
Replied 19 January 2015

The authorized capital of a Company determines the number of shares a Company can issue to its shareholders. An increase in authorized capital might be required for issuing new shares and/or inducting more capital into the Company

In relation to a company, it is the amount mentioned in the capital clause of the Memorandum of Association of the company. Upto this amount the company can raise capital. If the company wants more capital then the capital clause has to be amended by the members by passing a special resolution at a meeting.

In case you want to bring more fund in the nature of issue of further share capital which is in excess of authorized share capital of the company, you have to increase authorized share capital. In case you want to borrow fund, to bring additional fund in to your business no need to increase authorized share capital