Question:
The amount of share capital which a company is authorised to issue by its Memorandum of Association is known as:
The amount of share capital which a company is authorised to issue by its Memorandum of Association is known as:
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The term Nominal Capital (or Registered/Authorised Capital) refers to the legal ceiling set in the MoA. A company cannot issue shares beyond this limit without altering the MoA.
Updated On: Jul 15, 2025
- Issued Capital
- Reserve Capital
- Nominal Capital / Registered Capital
- Subscribed Capital
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The Correct Option is C
Solution and Explanation
Step 1: As per the Companies Act, the Memorandum of Association (MoA) of a company specifies the maximum amount of share capital that a company is authorised to raise.
Step 2: This maximum limit is called Nominal Capital or Authorised Capital, also known as Registered Capital. It is mentioned in the Capital Clause of the MoA.
Step 3: The other types of capital mentioned are:
- Issued Capital: Part of authorised capital offered to investors.
- Subscribed Capital: Part of issued capital actually taken up by shareholders.
- Reserve Capital: Part of subscribed capital reserved to be called only at the time of winding up.
Step 2: This maximum limit is called Nominal Capital or Authorised Capital, also known as Registered Capital. It is mentioned in the Capital Clause of the MoA.
Step 3: The other types of capital mentioned are:
- Issued Capital: Part of authorised capital offered to investors.
- Subscribed Capital: Part of issued capital actually taken up by shareholders.
- Reserve Capital: Part of subscribed capital reserved to be called only at the time of winding up.
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