Which of the following statements is true?

Authorised Capital > Issued Capital

The correct answer is option 2- Authorised Capital > Issued Capital.

* Authorised Capital > Issued Capital- This is true. Authorised capital is the amount of share capital which a company is authorised to issue by its Memorandum of Association. The company cannot raise more than the amount of capital as specified in the Memorandum of Association. It is also called Nominal or Registered capital. The authorised capital can be increased or decreased as per the procedure laid down in the Companies Act. It should be noted that the company need not issue the entire authorised capital for public subscription at a time. Depending upon its requirement, it may issue share capital but in any case, it should not be more than the amount of authorised capital.

OTHER OPTIONS

* Authorised Capital < Issued Capital- This is false. Issued capital is that part of the authorised capital which is actually issued to the public for subscription including the shares allotted to vendors and the signatories to the company’s memorandum. The issued capital can be equal or less than authorised capital but it can never be more than authorised capital.

* Paid up Capital > Issued Capital- This is false. Paid up capital is that part of called up capital which is paid by the shareholders. It can be equal to issued capital in case of complete payment by shareholders but it can never be greater than issued capital.