Frequently Asked Questions

What is the importance of the Capital Clause in determining the company's authorized capital?

The Capital Clause plays a crucial role in determining a company's authorized capital, which is the maximum amount of capital that a company can raise from its shareholders. This clause is a part of the company's Memorandum of Association (MOA) and provides detailed information about the total capital held by the proposed company. The Capital Clause ensures that companies do not collect more money than the amount listed under authorized capital, thereby maintaining financial transparency and accountability. The Capital Clause also outlines how the capital is divided into equity share capital and preference share capital. This division is essential as it determines the rights and privileges of different shareholders. The number of shares the company allocates to equity share capital and preference share capital, along with their value, must be included in the MOA. This information is crucial for potential investors as it helps them understand their potential return on investment and the risks involved.