Read the following case study, answer the question:

Raja Pvt Ltd. has been operating in the field of Oils and Food items for last 10 years. Established in South India, has started its operations in some parts of Gujarat as well. Looking at growing demand and production the company wants to raise its Capital through an IPO to expand its operations in North India as well. The company was started in the year 2009 with only 3 members and now had 5 members and 20,000 employees. It was decided to convert the company into Public Ltd. Company. The Memorandum of Association of the company provides for ₹60,00,000 of Capital out of which the company issues ₹40,00,000 of share capital (40,000 equity shares of ₹100 each). The shares were issued at a premium of ₹20 but the company was able to get subscription of only 38,000 shares. Amount is paybale as follows ₹10 on application, ₹50 on allotment and Two calls of ₹20 each. Premium amount is to be received on allotment. The company was able to receive all money on all the shares except on 200 shares on I^st call and 300 share final call was not received. The company forfeited the shares of those who did not pay I^st call.

The Memorandum of Association of the company provides for ₹60,00,000 as a Capital required during the lifetime of the Company. Which type of Capital is this?

Authorised Capital

The correct answer is Option (4) - Authorised Capital.

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.