Background

Section 2(8), Section 2(86), and Section 12 of the Companies Act, 2013 define and regulate the disclosure requirements for different categories of share capital. These provisions ensure transparency in capital structure representation and protect stakeholders from misleading information about a company’s financial position.

Definitions of Share Capitals

1. Authorised Capital / Nominal Capital (Section 2(8))

Such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.

Key Characteristics:

• • Represents the maximum limit of share capital a company can issue
  • Specified in the Memorandum of Association (Capital Clause)
  • Does not represent actual funds raised
  • Can be increased through alteration of memorandum (subject to Board and shareholder approval)
  • Company cannot issue shares exceeding this limit without first increasing authorised capital

2. Subscribed Capital (Section 2(86))

Such part of the capital which is for the time being subscribed by the members of a company.

Key Characteristics:

• • Represents the portion of authorised capital actually taken up by shareholders
  • Reflects shares allotted to members (whether fully or partly paid)
  • Cannot exceed authorised capital
  • Dynamic figure – changes when new shares are issued and subscribed

Formula:

Subscribed Capital = Number of Shares Subscribed × Face Value per Share

3. Paid-Up Share Capital

The portion of subscribed capital for which consideration (payment) has been actually received by the company.

Key Characteristics:

• • Represents actual cash/consideration received from shareholders
  • Can be less than subscribed capital when shares are partly paid
  • Equals subscribed capital when shares are fully paid
  • Real money available to the company for operations

Special Provision – Differential Voting Rights: As per Section 2(86), where shares with differential voting rights (DVRs) have been issued, “paid-up share capital” shall be construed as “total voting power” for certain purposes.

Formula:

Paid-Up Capital = Subscribed Capital – Calls Unpaid (Calls in Arrears)

Publication Requirements under Section 60

Mandatory Disclosure Obligation (Section 60(1))

Whenever any of the following contain a statement of authorised capital, they must also disclose subscribed and paid-up capital:

Covered Documents/Communications:

• • Notice
  • Advertisement
  • Other official publication
  • Business letter
  • Billhead
  • Letter paper

Disclosure Requirements: If authorised capital is stated, the following must also be disclosed:

1. 1. Amount of subscribed capital
   2. Amount of paid-up capital

Formatting Standards: The subscribed and paid-up capital disclosure must be:

• • In equally prominent position as authorised capital
  • In equally conspicuous characters (same font size, style, visibility)

Penalty & Punishment

Section 60(2): If any default is made in complying with the requirements of sub-section (1), the company shall be liable to pay a penalty of ten thousand rupees and every officer of the company who is in default shall be liable to pay a penalty of five thousand rupees, for each default.