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Clearing up the confusion about Authorized capital and Paid up capital

May 10, 2013 - by Nida U.
Authorized Paid-up capital

Many clients get confused when it comes to filling out our applications for the registration of their companies. Where is the confusion? I will try explaining this by using the mostly asked questions from clients:

What is authorized and paid-up capital?

Authorized capital (aka authorized share capital, registered capital or nominal capital) is the maximum amount of capital that the company is allowed to raise from its shareholders, in exchange for company shares (as stated in the Memorandum of Association). Part of the authorised capital can, and frequently does, remain unissued.

Paid-up capital is the amount of capital that has actually been paid into the company account by its shareholders, in exchange for the company shares. Some countries impose minimum paid-up capital requirements for new companies. There is no such requirement in neither in Belize, BVI or Seychelles.

An IBC can have any amount of authorised share capital stated in its incorporation documents. Also IBC can have any amount of shares at any amount of value. There is no minimum share capital requirement and no maximum.

Standard authorized capital in Belize is USD 50k, in BVI – USD 50k and in Seychelles – 100k. This standard is what allows you to keep the government fee at minimum.

Can you not exceed the authorized capital?

You can. Many clients are confused when asking this, too, as they, in reality, doesn’t need to have more than the standard authorized capital. If you want to have authorized capital worth more than the standard, then you have to pay higher government fee.
If you just want to have more than USD 50k or USD 100k, depending on jurisdiction, in your companies account, you can. Capital is what you can ask shareholders to invest, you can earn and have as a company as much as you want and make.

Does the authorized capital need to stay unimpaired in the account?

No.

There is no minimum paid up capital requirement, so you don’t need to pay up anything, subsequently there is no requirement for the capital to be unimpaired.

Recap:

We suggest clients to register the standard amount of capital, as they don’t need to pay it up! You can, for example, register USD 50k or USD 100k, depending on jurisdiction, also register the same amount of shares at USD 1 each. Then issue only few, e.g., 10 shares.

By law, what you issue is what has to be paid up, so “legally” you owe to your company USD 10. What about the rest of the shares? Those will remain in safe treasury for future needs.

Thank you for reading my post! And you are welcome to leave comments, feedback, suggestions for other posts or contact me for more information.

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