Companies raise money from investors to fund capital requirements. Sometimes, money is also raised to fund the expansion and list on the exchanges.
Such money that is raised by issuing shares is called share capital. For example, a company can raise Rs 1million through the issue of 1 lakh shares of Rs 10 each.
Difference between issued share capital and paid-up share capital?
Issued share capital is the value of the shares that a company has offered to investors, whether privately or publicly held.
You would take the number of total shares and multiply by the face value to arrive at the subscribed share capital. This can never be more than the authorized share capital.
Let is give an example. If the outstanding shares of the company are 10 million and the face value is Rs 10, we say that the issued share capital is Rs 1 crore.
Paid-up share capital is the full value of the shares that are paid-up by all investors. Generally, issued share capital and paid-up share capital are frequently interchanged and are used almost as synonyms.
The difference between issued share capital and paid-up share capital basically lies in whether investors have paid-up the money on partially paid-up shares.
What is authorized share capital?
Authorized share capital is the maximum amount that the company is authorized to raise from all set of investors, public, private or the promoters.
The paid-up share capital can never exceed the authorized share capital of the company. For example, if the authorized share capital of a company is Rs 20 million, one cannot have a paid-up capital that exceeds this amount.
There are various terms that investors should know with regards to capital of a company. This includes the likes of authorized share capital, paid-up share capital and issued share capital. These are significant for investors, analysts and bankers.