In India, private limited companies are one of the most popular forms of business entities. They are preferred because they offer a separate legal entity status to the company, limited liability to its members, and are considered more trustworthy by banks and investors. For a private limited company registration in Delhi, one of the crucial steps is to determine the authorized capital of the company.
What is Authorised Capital?
Authorized capital is the maximum amount of capital that a company can raise through the issuance of shares. It is the upper limit of the company's borrowing capacity and the maximum amount of shares that can be issued to the shareholders. The authorized capital of the company is mentioned in the Memorandum of Association (MOA) of the company and can be increased or decreased by the company's board of directors with the approval of the shareholders.
What Purposes Does It Serve?
The amount with which the company launches its operations is known as the approved capital. Shares of the initial sum of money will be sold to investors, who thereafter become shareholders and the company's owners.
The sole exception to this rule is when a proprietor simultaneously launches a company by taking on the roles of shareholder and owner. It must be registered with RoC and have a certificate from RoC confirming that it has met all procedures linked to beginning a business if the allowed capital exceeds 50 lakhs.
Cash, bank draughts, or checks made payable on demand may be used to make the payment, but checks must clear before the money may be used to apply for registration.
When Should a Business Owner Consider Authorised Capital?
In India, the private limited company is one of the most widely used business structures. The 2013 Companies Act lays forth the regulations governing this form of corporation. In order to establish a Pvt Ltd company registration in Delhi, you must have at least one member and allowed capital.
When founding a corporation, the approved capital is crucial since it specifies how much money can be produced by issuing shares with certain rights attached. This system is based on the notion that shareholders should have some influence on a company's management and goals.
This can assist ensure that no one individual has an excessive amount of control over the course of the organization and can help prevent disputes or power struggles between members over time.
Minimum Authorised Capital for Private Limited Company Registration in Delhi
The Companies Act, 2013, which governs the registration of companies in India, does not specify any minimum authorized capital requirement for private limited company registration in Delhi NCR. However, the Registrar of Companies (ROC) in Delhi requires companies to have a minimum authorized capital of INR 1 lakh to complete the registration process.
While there is no legal requirement to have a high authorized capital, having a higher authorized capital can benefit the company in the long run. A higher authorized capital can help the company raise funds in the future without the need to alter the MOA and can also increase the company's credibility and reputation.
Process of Determining Authorised Capital for Private Limited Company
To determine the authorized capital for a private limited company, the following factors should be considered:
Business Plan: The company's business plan and financial projections can help determine the amount of capital required to start and run the business.
Shareholder Agreement: The shareholders' agreement should be taken into account while determining the authorized capital. The agreement should define the number of shares that will be issued and at what price.
Capital Structure: The capital structure of the company, including debt and equity, should be taken into account while determining the authorized capital.
Statutory Requirements: The ROC requires a minimum authorized capital of INR 1 lakh for private limited companies. Companies should ensure compliance with this requirement while determining the authorized capital.
Conclusion
The authorized capital of a private limited company registered in Delhi is a crucial factor in determining its borrowing capacity and the maximum amount of shares that can be issued to the shareholders. While there is no legal requirement to have a high authorized capital, having a higher authorized capital can benefit the company in the long run. It is essential to consider various factors while determining the authorized capital, including the business plan, shareholder agreement, capital structure, and statutory requirements. Companies should consult with a professional while determining the authorized capital to ensure compliance with the relevant laws and regulations.
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