馃攳
Paid Up Capital, Authorized Capital & Issued Share Capital - #6 MASTER INVESTOR - YouTube
Channel: Asset Yogi
[0]
Press the bell icon while subscribing to the channel
[3]
So that you will get the notification of the latest finance video.
[5]
Namaskar, my name is Mukul and you are welcome to the Asset Yogi
[9]
Friends, in our last video, we tried to understand
[11]
the meaning of "limited" in the Private Limited Company
[14]
It is the biggest advantage for the company. So if you haven't watched that video,
[18]
then I would suggest you watch that video before this video
[21]
You'll find the link in the description. In this video, we will go a step further
[26]
If you want to start a private limited company then you will hear some more terms
[31]
Many people asked me in the comments
[34]
that what is authorized capital, what is issued capital
[38]
and what is paid-up capital?
[40]
So see, when you want to start a business then these terms get very confusing
[45]
And you may wonder why this type of complex structure is made.
[49]
See, it's not at all a complex structure
[51]
We make it complex all on our own
[53]
Everything has a reason. I will tell you what it is.
[56]
We will understand this in detail.
[59]
Let's go straight towards the whiteboard.
[60]
Music
[67]
First, let's talk about authorized capital.
[70]
See, whenever you establish a private limited company
[73]
Then you have to issue shares in that.
[75]
All the promoters or owners
[77]
will invest the amount, 5 lacs, 10 lacs whatever
[80]
the minimum amount they want to invest
[82]
The shares are issued to them against that money.
[85]
So now, how many shares will be issued? This is decided
[88]
by authorized capital or issued capital
[91]
We will understand this a bit.
[93]
What is an authorized capital?
[95]
Any company which issues a maximum number of shares
[100]
This is decided by authorized capital
[103]
For example, the maximum authorized
[105]
shares of any company are 1 lakh
[108]
So the value of every share is 10 Rs
[112]
So the authorized capital of any
[114]
company will be 10 lakh.
[115]
Any company whose authorized capital is 10 lakh
[119]
and the value of each share is 10 Rs
[120]
It cannot issue shares of more than 1 lakh
[124]
If the company wants to issue shares of more than 1 lakh
[127]
Then, it will need the approval of the government
[129]
Now let's talk about issued capital and paid-up capital.
[133]
Assume the promoters have kept the authorized capital as 10 lakh Rs
[137]
And the promoter says that 6 lakhs will work for us
[140]
We don't want to issue all the shares at once.
[143]
We will issue 60,000 shares and we will invest 6 lakh Rs
[148]
So, 60000 shares 脳10 (the value of one share is 10)
[152]
So they have invested 6 lakh Rs
[154]
So this value will be your issued capital
[158]
Because 60000 shares are already issued to the promoters.
[164]
So issued capital, 60% shares are already issued.
[168]
Because this money is already invested in the company
[172]
That's why we can also
[173]
call it a paid-up capital
[175]
So see, the issued capital and paid capital is the same here
[180]
but if there is a public limited company and the money is raised
[184]
from the stock exchange or the money is raised through IPO
[187]
Then there can be a difference between these two
[189]
But if we say generally to understand in a simple language
[192]
So whenever we start a new company then issued capital and paid-up capital is the same
[197]
Whatever you have invested initially
[199]
And the shares issued against that money will be your issued capital or paid-up capital
[204]
So the remaining 40000 shares left
[207]
See, you have invested 6 lakhs Rs in the pot
[210]
So why are these 40000 shares are left and what is the benefit of this
[214]
Why are these left? Why not purchase the shares of 10 lakhs by yourself?
[220]
There is a reason for that also. What is the reason?
[222]
We keep this for future investments
[225]
I will write about it here. Future investments
[227]
If you want to raise money in the future
[231]
So you leave some shares for that. Whoever will be the new investor,
[235]
will invest money then you can issue these shares to them.
[240]
So see, understand the second case
[241]
If you have issued all the shares to yourself
[245]
You have filled the whole pot
[247]
And this was paid-up capital and you have invested 10 lakhs in the company
[252]
So in that case, if you would have to raise investment in the future
[256]
So you would have to increase this authorized capital
[260]
And when we increase authorized capital
[262]
Then for that, we need the approval of shareholders
[266]
And with that, we have to pay the government fees
[268]
So the process becomes a little cumbersome
[270]
So whenever you start a company
[272]
Then don't do it a 100% paid-up capital
[276]
If you want to raise investment in the future
[279]
If your company is profitable
[281]
and if you think that you will be its owner forever
[284]
Then you can do 100% paid-up capital
[287]
Otherwise, if you want to raise any investment in the future then
[291]
you should keep some unissued capital for that.
[295]
So the empty part, the part which is not filled up by water
[298]
This means that is not paid up, what do we call it?
[302]
We call it unissued capital because you haven't issued it
[306]
The company has these shares. So see, a question that arises here is that
[310]
Whenever I issue these shares then I can raise an investment of a maximum of 4 lakhs
[317]
No, it's not like fat that
[318]
See, this is only face value.
[321]
So when you raise an investment then you will not
[323]
sell these shares at 10 Rs
[326]
Its market value could be anything
[330]
So what is the difference between market value and face value?
[333]
And with that, what is the difference between book value
[336]
I have already made a detailed video on this
[338]
You can watch that video of mine
[340]
So you can sell these 40000 shares
[344]
at 1000 Rs instead of 10 Rs
[348]
You can also sell it for 10000 Rs
[350]
Its value could be anything
[351]
It depends on the valuation of your business
[356]
But face value will always remain the same
[359]
Unless it is being changed by writing
[363]
I hope by watching this video, you understood the difference between
[366]
issued capital, paid-up capital, and authorized capital
[369]
So if you want to start a business in which you will keep 100% ownership to yourself
[375]
Then you can go with 100% paid-up capital
[378]
If you want to start a business where you will have to raise an investment
[383]
in the future, so in that case, you should keep some unissued capital
[387]
I hope you liked this video. And if you liked this video then like and share the video
[392]
If you have any suggestions or you want to suggest any topic for the future videos
[396]
Then comment below. If you haven't subscribed to the channel yet
[399]
Then subscribe and press the bell icon
[402]
So that you will get the notification of the latest video.
[405]
So let's meet in the next informative video
[407]
Till then keep learning, keep earning
[409]
And be happy as always.
Most Recent Videos:
You can go back to the homepage right here: Homepage