Authorised capital
What Authorised capital means, how it works, a worked example, the mistakes we see and the questions founders ask.
DefinitionAuthorised capital is the maximum value of shares a company is permitted to issue under its MOA, and the figure on which MCA fees and stamp duty at incorporation are calculated.
Authorised capital is a ceiling, not money you must put in. A company with ₹10 lakh authorised capital can issue shares up to that value over time; what it has actually issued and received is its paid-up capital. You set the figure in the MOA at incorporation, and it drives two costs: the MCA incorporation fee, which is nil up to ₹15 lakh, and stamp duty, which varies by state. Most startups begin with ₹1 lakh to 10 lakh and raise it before a funding round, because shares cannot be issued beyond the ceiling. Raising authorised capital needs an ordinary resolution, Form SH-7 and the extra fee on the increase. Setting it higher than you need at the start only costs money in some states, so keep it modest.
How Authorised capital works
Authorised capital is the ceiling in the capital clause of the memorandum: the total face value of shares the company may issue. It is not money the company has; it is permission. A company with ₹10 lakh authorised capital and ₹1 lakh paid up has headroom to issue ₹9 lakh more at face value without touching the memorandum.
There is no legal minimum since 2015. The figure matters for cost and for timing. Registrar fees at incorporation are nil up to ₹15 lakh, and stamp duty on the memorandum and articles is charged by most States on the authorised capital, so founders choose a number that covers the next two or three rounds without overpaying duty today.
Raising it later is routine: an ordinary resolution at a general meeting (if the articles allow; a special resolution otherwise), Form SH-7 within 30 days, the Registrar's fee on the increase and the State's stamp duty on the increase. Investors issuing shares at a premium need headroom at face value only, so a ₹10 lakh ceiling supports a round of several crore when the shares are priced at ₹1,000 each.
A Mumbai company has ₹1 lakh authorised and paid-up capital in ₹10 shares. A seed investor will subscribe ₹2 crore for 2,000 preference shares of ₹10 each at a premium of ₹9,990. Face value of the new shares is only ₹20,000, so the ₹1 lakh ceiling still has room and no SH-7 is needed. Had the round been structured with a lower premium and more shares, the company would have raised the ceiling first with SH-7 and the fee on the increase.
Mistakes we see with Authorised capital
- Confusing authorised with paid-up capital on the GST portal or a tender form, and overstating the company's funds.
- Allotting shares beyond the authorised ceiling, which is void and has to be unwound before any PAS-3 can be filed.
- Setting the ceiling very high at incorporation in a State that charges duty on it, and paying thousands of rupees for headroom that will not be used for years.
Last updated 19 October 2026. Checked against the MCA, GST, Income-tax and Trade Marks rules in force for October 2026.
Where you will meet this term
Questions founders ask about Authorised capital
What is the minimum authorised capital for a private limited company?
There is none. Companies are commonly incorporated with ₹1 lakh or ₹10 lakh because Registrar fees are nil up to ₹15 lakh, but any figure is lawful.
How do I increase authorised capital?
A general meeting resolution to alter the capital clause, Form SH-7 within 30 days, the Registrar's fee on the increase and the State's stamp duty on the increase. The same resolution usually also alters the memorandum, filed on MGT-14 where a special resolution was used.
Does an investment round need a higher authorised capital?
Only if the face value of the new shares would push the issued capital past the ceiling. Shares issued at a premium use little face value, so most rounds fit; a bonus issue or a large face-value issue would not.