Registered Capital in India
By Dezan Shira & Associates
Posted: 24th August 2012 09:30
In India, the Companies Act of 1956 made rules and regulations for the establishment of both public and private organizations. The most widely used business form is the limited company, unlimited companies being comparatively rare. An organization is formed by registering the Memorandum and Articles of Association with the State Registrar of Companies of the state in which the head office is to be positioned.
Authorized capital is the worth of shares which entities are allowed to issue. If entity’s authorized capital is Rs. 1 lakh, you can issue shares of upto Rs. 100,000. These can be 10,000 shares of Rs. 10 each, 1,000 shares of Rs. 100 each or any other value which entity has decided. The regulation stipulates that the authorized capital has to be at least Rs. 100,000 for a Private Limited Company in India today. Anything more than Rs. 1 lakh and the Stamp Duty which an entity has to pay to incorporate a company increases. An entity has to pay this at the time of incorporation itself.
Even with an Authorized Capital of Rs. 100,000, an entity can invest a lot of capital in your computers, technology, salaries and other expenses.
If an investor wants to come into a Company with an investment of Rs. 10 million, it does not mean that an entity cannot set up a company. An entity can raise the authorized capital, or sell a stake (say 10 percent) at a higher valuation per share.