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Reviewed by Sep 23, 2021| Updated on
Known as the registered capital or nominal capital of the company, Authorised Capital is the maximum amount of share capital that a company is allowed to issue to its shareholders as per its constitutional documents. Shares are defined as the financial instruments that form units of the overall capital. It is used to raise funds from the general public.
It is used to limit the ability of directors to allot new shares which may have consequences over the control over the company. It is also used to prevent any shift in the profit distribution balance. Often, the amount provided as authorised capital is not fully used and a small percentage is kept as a safety buffer to raise additional capital when need arises.