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    Question

    The MoA of the company specifies the maximum capital

    that can be raised by a company. This is referred to as the __________
    A Paid-up capital Correct Answer Incorrect Answer
    B Nominal capital Correct Answer Incorrect Answer
    C Subscribed capital Correct Answer Incorrect Answer
    D Issued capital Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Authorized capital is the maximum amount of capital a company can legally issue to its shareholders. It's a fundamental concept in corporate law and is established during the company's incorporation process and mentioned in its Memorandum of Association (MoA). It is also called nominal capital or registered capital of the company. It is used to limit the ability of directors to allot new shares which may have consequences over the control over the company. It is also used to prevent any shift in the profit distribution balance. Often, the amount provided as authorised capital is not fully used and a small percentage is kept as a safety buffer to raise additional capital when need arises.The authorized capital can be altered only after following the procedure provided by law which involves the approval of the shareholders and an additional fee being paid to the Registrar of Companies (ROC).

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