Each business needs more funds over time to run business. These funds can be required on a long- and short-term basis. A short-term need can be satisfied by taking loans and advances. But in the long run, the company will require more funds. For a Private Limited Company, this can be done by increasing the company's authorised capital. Since the private limited company is governed and regulated under the Company Act to make changes in the structure, it is necessary to follow the Act and the rules stated.
What is Authorized Capital?

According to Section 2 (8) of the Companies Act 2013, “Authorized Capital” is the capital authorised by the company's memorandum to be the maximum amount of the share capital of the company.

The company can expand its business to the level of the authorised capital. If the company has to expand the business, infusing more funds than at first, the company has to increase the authorised capital.

Authorised and Paid-Up Capital of a Company

Authorised share capital represents the total potential value of shares a company can issue. In contrast, paid-up capital is the actual value of shares that have been fully issued, subscribed to, and paid for by shareholders. The company cannot exceed its authorised share capital with its paid-up capital. Therefore, if a company's paid-up capital reaches the limit of its authorised capital and it aims to welcome new shareholders, it has two options:

Either increase its authorised share capital and then issue new shares or

Facilitate the transfer of shares from current shareholders to new ones.