Find out incorrect statements about Authorised Capital of a company.
(A) It is the amount of share capital which a company is authorised to issue by its Memorandum of Association.
(B) It is the amount of share capital which a company is authorised to issue by its Articles of Association.
(C) It is also called Nominal capital.
(D) It can be increased or decreased as per the procedure decided by the shareholders of a company.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (B) and (D) only
The question asks for the incorrect statements. Authorised capital is the maximum share capital a company may issue, and it is fixed by the Memorandum of Association.
(A) It is the amount of share capital which a company is authorised to issue by its Memorandum of Association. Correct. This is the definition of authorised capital, so it is not one of the answers.
(B) It is the amount of share capital which a company is authorised to issue by its Articles of Association. Incorrect. The limit is set by the Memorandum, not the Articles; the Articles deal with the internal rules, such as the rights of each class of shares.
(C) It is also called Nominal capital. Correct. Authorised capital is also called nominal or registered capital, so it is not one of the answers.
(D) It can be increased or decreased as per the procedure decided by the shareholders of a company. Incorrect. It can be changed only by the procedure laid down in the Companies Act, not by any procedure the shareholders choose.
NCERT (2026-27 edition): |