Authorised Share Capital

At registration you declare a figure, divide it into shares, and allocate those shares between the founders. Two founders splitting a company evenly might declare one million naira divided into one million shares of one naira each, and take five hundred thousand shares apiece.

Later, when an investor comes in, the company issues new shares out of the authorised amount. If there is not enough headroom left, the members first pass a resolution increasing the authorised capital, then file it at the CAC and pay the difference.

Cost is the practical point. CAC filing fees are assessed on declared share capital, so a company registering with one million in share capital pays a minimum filing fee of ten thousand naira, and a company declaring far more pays far more, plus higher stamp duty.

This is why the common advice is to register with a modest figure and increase it when there is a reason. The exceptions are companies that need a specific minimum for a licence, and companies planning to bring in expatriate staff, where higher thresholds apply.

Authorised is what you are allowed to issue. Issued is what you have actually given to shareholders. Paid up is what those shareholders have actually paid for.

A company can be authorised at ten million, have issued two million, and have one million paid up. All three can differ, and mixing them up is how founders end up promising investors shares that do not exist yet.

A big authorised share capital impresses nobody who knows what it means. It says nothing about revenue, assets or whether the company can pay its bills, and reading it as a measure of size is a beginner's mistake.

Declaring a large figure just to look substantial simply raises your filing fee and your stamp duty for no benefit.