Authorized capital: concept, value, features

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authorized capital is initial investment of assets (usually cash) needed to start of activity of the enterprise.Its size is not arbitrary and is determined in accordance with certain rules of jurisdiction.Through the authorized capital it is possible to generate the funds needed for the first steps in business.

value of the authorized capital

Of course, it is important, and performs several functions.Here are the main ones:

  • it protects creditors.By this is meant that the capital offers investors an excellent guarantee that they will receive some compensation, even if the company will not succeed and will be completely ruined;
  • impact on market positioning.That's authorized capital experienced people are judged on how the company is successful and that waiting for her in the future (although this is not too informative);
  • for a growing company it is a start-up capital.Without seeding no commercial activity is impossible, because without fixed costs and expenses it will not do;
  • used as a means to limit the entry of the company into the market.In some cases, the activities would not be possible if the authorized capital of the company does not meet the requirements.All this is justified by the fact that a serious business requires a lot of responsibility.

minimum capital

such capital should be calculated in accordance with all the requirements which are established authorities jurisdiction relating to regulatory.Today, almost all countries set the minimum amount of funds that are essential to the opening of any firm.To register a company will need to undergo procedures that are associated with the collection and delivery of documents and writing and other applications.

The authorized capital may be made not only money, but also material assets, property rights, and even securities - is quite acceptable.

calculations in this case take place by means of the minimum wage, although sometimes indicated and the amount of money.For JSC - 100 is the minimum wage, of - 1000 minimum wage, the minimum authorized capital of LLC must be greater than 100 minimum wage, municipal unitary enterprises - is the minimum wage in 1000, and state-owned enterprises should have registered capital of not less than 5000 minimum wage.These data relate only to Russia.

Funds, ELN and other non-profit organizations according to the law can be created without it.

Capital Increase

The authorized capital of Company, Ltd. and other commercial organizations may eventually be increased.Without this, the company's growth is not possible.This is only possible if the previous one was submitted to the authorized capital.The decision to increase it is taken directly to the general meeting of the company or its shareholders.

reasons which lead to its increase:

  • need to finance the company's growth.In this case, perhaps even financing from third parties;
  • the need for employees of securities;
  • reason for its increase, and can be merged with any other company.

Undoubtedly, growing company needs to constantly increase its share capital, and the information on it, as a rule, should be available to the public.

Reduction of the authorized capital

There are cases when the company reduced its authorized capital.Objectives here may be different.This is the most basic:

  • to increase shareholder value.The authorized capital is increasing, and with it grows and the number of shares - this leads to a partial devaluation.In other words, it does not decrease the shares of shareholders to blur.
  • to optimize the management of the authorized capital.