Introduction

In the context of company formation and structure, authorized capital and paid-up capital are two essential financial terms that define the funding capacity and ownership of a business. For a One Person Company (OPC), introduced under the Companies Act, 2013, these capital norms offer significant flexibility, especially for individual entrepreneurs starting small. While the law has removed minimum capital requirements, certain thresholds still play a role in regulatory compliance and business expansion. This article defines the norms related to authorized and paid-up capital in an OPC and explains their practical implications.

Authorized Capital – Defined

Authorized capital (also called nominal or registered capital) refers to the maximum amount of share capital that an OPC is legally allowed to issue to its sole shareholder. This limit is declared in the Memorandum of Association (MOA) at the time of incorporation. The OPC cannot issue shares beyond this limit unless the authorized capital is formally increased by passing a board resolution and filing Form SH-7 with the Registrar of Companies (RoC).

Paid-Up Capital – Defined

Paid-up capital is the actual amount received by the company from the shareholder in exchange for shares issued. It represents the real financial contribution made by the sole member toward the company’s capital. Paid-up capital can be equal to or less than the authorized capital but never more than it.

No Minimum Requirement for Incorporation

As per the amended rules under the Companies Act, there is no minimum paid-up capital requirement for incorporating an OPC. Earlier, ₹1 lakh was the prescribed minimum, but it has now been removed, allowing OPCs to be formed even with a token capital of ₹1, making it easier for small entrepreneurs to start businesses.

Capital Contribution Can Be in Cash or Kind

The paid-up capital can be infused in the form of cash or non-cash assets, such as equipment, intellectual property, or other valuable contributions. However, proper valuation and documentation are required for non-cash contributions to be legally recognized.

Impact on Compliance and Regulatory Filings

While there is no statutory minimum, the capital amount must be declared and reflected in the incorporation documents and financial statements. Any change in paid-up or authorized capital must be updated with the RoC through proper filings to maintain legal accuracy and compliance.

Thresholds for Mandatory Conversion

An OPC is required to convert into a private limited company if its:

• Paid-up capital exceeds ₹50 lakh, or
  
• Turnover exceeds ₹2 crore in any financial year
  

This rule ensures that OPCs remain limited to small-scale businesses and that growing enterprises shift to a more appropriate corporate structure with broader accountability.

Capital Determines Shareholding and Ownership

Since an OPC has only one shareholder, the entire paid-up capital is held by a single individual, giving them full control over the business. This simplifies ownership structure and profit distribution but also places complete financial responsibility on that one member.

Flexibility for Future Capital Expansion

OPCs can increase their authorized and paid-up capital as the business grows. This involves passing internal resolutions and filing statutory forms with the RoC. The flexibility allows businesses to expand without needing to overhaul their original structure, at least until conversion becomes mandatory.

Conclusion

Authorized and paid-up capital norms in OPCs are designed to provide maximum flexibility and ease of entry for solo entrepreneurs. With no minimum capital requirement and simple compliance procedures, OPCs can start with limited funds and expand gradually. However, these capital parameters still serve as important thresholds for compliance and conversion. Understanding and managing them effectively is essential for legal conformity, business planning, and long-term scalability.

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