Authorized Capital is the maximum amount of capital the company is allowed to hold. Authorized capital is the maximum number of shares that company can issue to pump funds.
There is a close relation between the face value of the share (when first issued) to the authorized capital of the company.
Authorized capital is defined in a class of MOA. Authorized capital need be the capital the company may need in future for business operations. It is just the capital the company can have at any point of time. Likewise at any point of time, a company may give amendments to authorized capital class of MOA by registering same with ROC. (I hope I can use "MOA" and "ROC". Kindly check previous posts to know what they mean)
If a company has 100 lakhs as authorized capital, till it could issue shares only for 50 lakhs.
Remaining shares could be issued by the company at any point of time later. At no point the capital could not exceed 100 lakhs unless there is an amenIn dment registered.
In this case 100 lakhs is authorized capital and 50 lakhs is issued captial
Dividend
Dividend is the portion of profit every share deserves. If a company makes a profit, then the profit would be distributed among shares issued. Each share get its portion of profit, "dividend"
Types of shares
Ordinary Shares : These is most risky shares as they do not have any special privileges or restrictions. If a company is winding up, these are the shares which are suppose to be settled at last.
Preference Shares These shares have special privileges like getting dividends well before ordinary shares and restrictions like there will be restrictions on dividend if the company makes great profits.
Redeemable Shares These shares are of the type the company could buy back from share holder at any time fixed by the company.
These basic types are enough.
So, the company generate funds for its business by means of shares, the shares are issued to people.
