Question

Nominal/Authorised Share Capital is

• A. that part of the share capital which is issued by the company.
• B. the amount of share capital which is actually applied for by the prospective shareholders.
• C. the maximum amount of share capital which a company is authorised to issue.
• D. the amount actually paid by the shareholders.

Hint:

Think of Authorised Capital as the size of an empty bucket. The company can fill it with "Issued Capital" up to that level, but it cannot overflow the bucket without legally increasing the bucket's size (altering the Memorandum of Association).

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Share capital is categorized into different types based on its stage in the issuance process. Authorised capital, also known as Nominal or Registered capital, is the legal limit established during the company’s incorporation.
Step 2: Detailed Explanation:
Authorised capital is the maximum amount of share capital that a company is legally allowed to issue to its shareholders as per its Memorandum of Association. It represents the "ceiling" of the company’s fundraising capacity through equity.
To differentiate from other options:
- Option (a) refers to Issued Capital.
- Option (b) refers to Subscribed Capital.
- Option (d) refers to Paid-up Capital.
Step 3: Final Answer:
Nominal/Authorised capital is the legal authorization limit defined in the company's constitution.