Question

The amount of share capital which a company is authorised to issue by its Memorandum of Association is known as:

• A. Nominal capital
• B. Issued capital
• C. Reserve capital
• D. Subscribed capital

Hint:

Remember the hierarchy: Authorised (Nominal/Registered) Capital \(\ge\) Issued Capital \(\ge\) Subscribed Capital \(\ge\) Called-up Capital \(\ge\) Paid-up Capital. Reserve Capital is a distinct concept related to uncalled capital.

Answer 1

The Correct Option is A

The maximum amount of share capital that a company is authorized to issue, as stated in the Capital Clause of its Memorandum of Association, is known as Authorised Capital. It is also referred to as Nominal Capital or Registered Capital. \begin{itemize} \item[(B)] Issued Capital: Part of authorised capital offered to the public for subscription. \item[(C)] Reserve Capital: Portion of uncalled capital reserved to be called only on winding up. \item[(D)] Subscribed Capital: Part of issued capital subscribed by the public. \end{itemize} Therefore, Nominal Capital is the correct term for the authorised amount.