Authorized and paid up capital

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Spartan

Owner

21 Points Posted on 08 February 2012

Hi all, I have a quick question. I am analyzing a private company and I had a few questions:

It has revenues of Rs.5cr and having a steady growth rate. But in the balance sheet, it has authorized and paid up capital of only 37,500 shares @ Rs.10/share face value. Is this normal for a company? To have such low number of shares authorized and paid up? Does it affect the standing of the company in any way, or it doesn't really matter? I am guessing that they have been spending their cash or income on investments and hence kept it low.

And they have valued the company at Rs.12.5cr essentially make the per share value at Rs.3,333, and hence a premium of Rs.3,323. I am just wondering if this is justifiable, or they have to increase the authorized share cap to make the values per share more reasonable.

Will appreciate your responses! Looking forward.

Thanks!

Replies (3)

vishal patil

accountant

24 Points Posted on 06 April 2012

pls give me resolution paid up capital format

khyati

30 Points Posted on 06 April 2012

These shares wont affect the standing of the Company atall. There is no relationship between number of shares and Revenue generated by the Company or its Value.

Charu Srivastava

Company Secretary

2819 Points Posted on 07 April 2012

Agree with Khyati,

Authorised Capital is the capital with which the company is registered.It is the maximum amount of capital which the company can raise. It is kept keeping in view the fund requirement of the Company.However also refer to the name guildelines.

As it is Private Company, so minimum prescribed paid up capital is 1 lac unless articles stae otherwise.

In your case paid up is 375000, so its is as per the law.There is no violation watsoever.

other views are solicited.

Regards

Charu