Authorized share capital refers to the total share capital which a joint stock company is authorized to accept from its investors. A company cannot raise capital more than what it is authorized. The amount of authorized share capital can be found in memorandum of association (MOA) and articles of association (AOA) of a company.
It is the capital with which a company gets registered that’s why it is also known as registered capital.
Example of authorized share capital:
Lets assume that ABC ltd. got registered with a capital of Rs 1,00,00,000 (1 crore) divided into shares of Rs 10 each. The management decides to issue 8,00,000 (8 lakh) shares to raise fund of Rs 80,00,000 (80 lakh). The investors subscribe only for 6,00,000 (6 lakh) shares. Now the company calls for Rs 4 per share out of Rs 10 (Nominal value of shares) and it gets the full amount for only 5,50,000 (5 lakh 50 thousand) shares.
Then,
Authorized share capital = Rs 1 crore (10 lakh shares of Rs 10 each)
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