As per the Companies Act, 2063 (2006) of Nepal, the authorized capital of a company refers to the maximum amount of capital that a company is legally allowed to issue to its shareholders.
Key Provisions Related to Authorized Capital:
- Definition:
- The authorized capital is the capital stated in the company’s Memorandum of Association (MOA) as the highest amount of capital the company can raise by issuing shares.
- Determination:
- The company itself determines its authorized capital at the time of incorporation.
- The authorized capital must be clearly mentioned in the MOA and Articles of Association (AOA).
- Increase in Authorized Capital:
- A company can increase its authorized capital through a special resolution passed at a general meeting and by amending its MOA & AOA.
- Approval from the Office of the Company Registrar (OCR) is required.
- Minimum Requirement:
- There is no fixed minimum authorized capital under the Companies Act, except for some regulated sectors (like banks and financial institutions), where the regulatory body (like Nepal Rastra Bank) prescribes a minimum requirement.
- Relation to Paid-up Capital:
- A company’s paid-up capital (the actual amount of shares issued and paid by shareholders) cannot exceed the authorized capital.