Paid Up Capital: Significance and Features Explained

Paid up capital is the money put into the company by the investors in return for the stocks bought by them. Concept of Authorised Paid Up Capital is also clarified in this article.

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A Complete guide to Paid-Up Capital

What is Paid-up Capital?

The paid-up capital simply refers to the amount received by a corporation from investors in exchange for issued shares. Simply expressed, paid-up capital is the money invested in the firm by investors in exchange for the shares they purchased.

When compared to the permitted capital, the paid-up capital is equivalent or less. But why? Because the business may issue less shares than the maximum amount of capital that should be sold officially. So, if the paid-up capital and approved capital are identical, a business cannot grow its excess capital needs by issuing stocks unless the authorized capital increases as well. If not, external capital borrowing may be necessary to meet the finance requirements for the firm to develop.

More details on Paid-Up Capital

Another term for paid-up capital is contributed capital or paid-in capital. 

This capital is received from 2 main sources of funds:

  • Par value of stock
  • Excess capital

Every share of stock is given with a base price, known as the par. Typically, this number is maintained low. So, any amount supplied by investors that exceeds the value of par is considered paid-up capital over par. The value of the par of supplied shares is recorded on the balance sheet as either preferred stock or common stock. This will be entered into the column for shareholder equity.

To illustrate, suppose a corporation raises Rs 1 crore in authorized capital and prices each share at Rs 10. The business then receives applications for 8L shares, but it only registers 1Cr shares at Rs 8 apiece. So, assuming all of the investors’ requirements are satisfied, the paid-in capital will reach 80L.

This helps us realize that 80L funds the firm through investors based on the quantity of shares purchased. The corporation can increase the remaining capital, which is Rs 20L, at any moment.

What is a meaning of Paid-up Capital?

The sum of funds a corporation has collected from investors in return for the stock is known as paid-up share capital. Paid-up capital is formed when a firm offers its shares in the company to buyers on the main market, typically via an initial public offering (IPO). Once investors start buying and selling shares on the resale market, no new paid-up capitalization is formed because the profits go to the selling stockholders rather than the issuing business.

  • Paid-up capital is the amount received by a firm from the immediate issuance of shares to shareholders.
  • The primary market is the sole location where paid-up capital can be obtained, generally through an IPO.
  • The par stock value and surplus capital are the two funding sources for paid-up capital.
  • The money charged by shareholders well above the par price of a stock is known as paid-up capital.

The paid-up capital also represents the equity financing.

Significance of Paid-up Capital

Paid-up share capital represents cash that has not been borrowed. A fully paid-up corporation cannot increase capital without borrowing cash since all of its current shares has already been sold.

Nevertheless, a company may be granted authority to issue new shares.

The quantity of paid-up capital represents the company’s current financial position, reliance on its stock, and ease of debt repayment.

Features of Paid-up Share capital

  • When you use paid-up capital to finance your firm, you sell the shares rather than borrow the money, thus those funds don’t have to be repaid.
  • The stockholders can still anticipate some level of capital gains from the business.
  • Paid-up capital acquired by the businesses is regarded as equity, and having more equity than debt is advantageous. Shareholders, therefore, take paid-up capital into account when conducting a firm’s fundamental research.

About Authorized Capital

When a business needs to obtain capital, it can’t just sell off sections of the business to the winning bidder. Firms must submit an appeal with the body in charge of company formation in the nation of formation to obtain approval to distribute public shares. Before the launch of a capital raising, corporations must apply to the Securities and Exchange Commission (SEC).

The authorized capital of a business is the highest source of funding it is permitted to obtain through the selling of stock. Usually, a firm’s authorized capital request is significantly greater than its minimum standard.

Difference Between Authorized Share Capital & Paid-up Share Capital

In a company’s financial record, without depending upon its category of business, type, or size, the share capital is classified. There are various types of it and all are mentioned in the financial statement. But, the important Companies (Amendment) Act 2015 has restricted the incorporation of the least paid-up capital for the firms, but the need for authorized share capital is still in existence.

Now, we will learn about both, authorized share capital and paid-up share capital in detail and then study what is the difference between the two. 

For every firm, the revenue structure is separated into 2 unique parts:

  • Paid-up Share Capital
  • Authorized Share Capital

Authorized Share Capital

It determines the quantity of capital over which the firm can hold shares to stockholders. It is to be noted that authorized capital is stated in the firm’s Memorandum of Association underneath the title “Capital Clause.” Another important fact is that authorized share capital is indeed established before the firm’s establishment. This type of capital can be raised at any moment later by taking the proper legal processes.

For instance, if ABC Pvt Ltd has an authorized capital of Rs. 20L and shares have been granted to stockholders up to a value of Rs.15L. This means that ABC Pvt Ltd has granted shareholdings equal to the highest limit, i.e., the authorized capital of the corporation, and also has the alternative to release more share price to Rs.5L in the years ahead without having to raise the authorized capital.

If, on the other hand, ABC Pvt Ltd has given shares for Rs.25L to stockholders with about the same authorized share capital of Rs.20L, the company has announced in surplus the maximum allowed limit, which is prohibited by law.

Paid-up Share Capital

Paid-up share capital is nothing but the number of funds for which stocks of the firm were given out to the investors. If at any given point of time the paid-in share capital becomes equal or less than the authorized share capital, the firm will become incapable of issuing shares beyond its set authorized share capital. The Companies (Amendment) Act of 2015 states that there isn’t any minimum need for paid-in share capital of the firm. This means that any company can be formed by putting up paid-in share capital of even Rs. 1K.

If any change occurs in these two types of capitals, the ROC, Registrar of Companies should be upgraded and modified. The elaborated data will get documented in the firm’s master data of MCA and will also be presented to the public to review.

Minimum Paid-up Capitals for Public & Private Companies

Public Limited Company

Under the Companies Act 2013, a public company is a company with limited obligations and which offers its shares to the common public. The main catch here is that the stocks of a public company can be bought by anyone. The mode of purchase is either done privately through IPO or directly through trades. In return, it is the job of the company to have strict regulations and issue its actual financial status to its investors.

Registration Needs for a Public Company

The Companies Act of 2013 gave out several laws and rules to be followed while forming a public limited company. 

When forming a public limited corporation, bear the following points into consideration:

  • A public limited corporation must have at least 7 investors to be formed.
  • This company must have at least three directors.
  • A share capital of Rs. 5 lakhs is needed at least.
  • When presenting self-attested documents of identification and location evidence, one of the members’ digital signature certificates (DSC) is required.
  • The prospective company’s directors will require a DIN.
  • For the company name selection, an application must be filed.
  • It is necessary to submit a request that includes the company’s principal object statement. This object statement will specify what a business will do after it is formed.
  • The form must be submitted to the ROC together with the relevant documentation such as the MOAAOA, and properly filed Form DIR – 12, Form INC – 7, and Form INC – 22.
  • The necessary registration fees must be paid to the ROC.
  • The organization should implement a ‘license of enterprise commencement’ after receiving clearance from the ROC.

Private Limited Company

Every current company organization or start-up aspires to establish itself as a Private Company in this age of Private Companies. The fundamental qualifying criteria and documents are the basis for this. It is a complete myth that forming a Private Limited Company necessitates a significant financial commitment.

Registration Needs for a Private Company

  • At least two and a max of fifteen directors are required.
  • At least 2 or a maximum of 200 investors are required. One individual, however, can serve both as a board member and a stockholder.
  • An international director might be appointed to a private firm. But at least one of the trustees must be a citizen of India.

There is no need for a minimum amount of capital. Previously, a Private Limited Company in India had to have a minimum capital of Rs 1,00,000 to be formed. The Companies (Amendment) Act of 2015, though, repealed the provision.

Paid-up Capital Formula

The Paid-up capital formula is:

Paid Up Capital = No. of Equity Shares Issued by the Company * Portion of Face Value of Share called up.

Let’s take an example, suppose a company ABC Ltd. whose Authorized Share Capital is 100,0000 equity Share of Face Value Rs. 20. It has issued 1,000 equity shares to the public and has called Rs. 10 per share.

Here Paid-Up Capital = 10,000 * 10 =10,000

Therefore, the Paid-Up Share Capital of ABC Ltd. is Rs. 10,000.

Read more: What is Equity Shares?


A firm having paid-up capital can focus on its growth without borrowing funds. When issuing shares, a firm should keep its authorized capital in mind. It must now issue shares that are always less than or equal to the permitted share capital in accordance with this authorized capital.

If you have any queries relating to paid-up capital, you can communicate with our professionals at OnDemand International


Authorized capital is the amount of funds that a company is allowed to get from selling its shares. It is written in the company’s Memorandum of Association (MoA), which is a public document that explains how the company is run. Authorized capital can be raised at any time if the shareholders pass a special vote and get the OK from the Central Government.

Paid-up capital is the amount of money that a business has actually gotten from its shareholders in the form of cash or other assets. It is always less than or the same as the cash that can be used. Paid-up capital helps pay for the business’s processes and growth.

Investors that pay paid-up capital typically pay more than a stock’s par value.

As a business cannot issue shares above its authorized capital, paid-up capital will always be less than authorized capital.

It is the total sum of investment made by the stockholders. In simple words, it is your investment & equity in a firm.

Yes, both paid-up capital and authorized capital are different types of capital. The authorized capital identifies the amount of capital over which the company can hold shares to shareholders, and the paid-up capital on the other hand is the amount of capital for which shares of the company are given out to the stockholders.

Paid Up Capital = No. of Equity Shares Issued by the Company * Portion of Face Value of Share called up.

The minimum amount of capital for a public company is Rs. 5 lakhs.

Small finance banks in India are required to have a minimum of Rs. 200 crore in paid-up voting equity capital. The Reserve Bank of India (RBI) mandated this in 2015.