The participation of the authorized capital in the company has a lot of features and functions. Without an understanding of this indicator, it is difficult to draw conclusions about the state of affairs of the enterprise. The authorized capital is one of the most important sources of funds involved in the activities of the enterprise. Therefore, its features and functions should be disassembled in detail.
What is the authorized capital
By definition, capital is the amount of funds, property of an enterprise, which is used to make a profit.
The authorized capital is an initial contribution of the founders of the company, invested to ensure a minimum profit, and also to satisfy the interests of creditors. Its main purpose is to insure the investments of lenders that they directed to generate company income.
Therefore, the authorized capital has a fixed value. This value is specified in the documents when creating the company.
The authorized capital of the enterprise in the form of ownership refers to equity. When establishing a legal entity, its authorized capital is equal to equity. The property of the company that it owns, when converted into cash equivalent, is the considered type of equity.
With a positive result of the enterprise’s activity, equity is increased by directing retained earnings back into circulation. In this case, the authorized capital will become less than the equity of the legal entity.
Performing the most important functions in the enterprise, the formation of these funds is clearly regulated by the legislation of the Russian Federation.
Formation of the authorized capital
Depending on the legal form An enterprise is formed and its initial net worth. A contribution to the charter capital of a partnership is the funds contributed by the founders to the activities of the company, guaranteeing each of them share ownership of the enterprise.
For a joint stock company, a contribution to the authorized capital is a fund formed by selling shares. The number of owners for this type of organization is quite large. Therefore, the composition of the owners is easily changing. This does not apply to closed joint stock companies.
Partnerships are convenient as a form of organizing small enterprises. Joint-stock companies are more suitable for large enterprises.
Organizations such as cooperatives and municipal companies are less popular. The authorized capital of municipal organizations is formed from state or local budgets. Cooperatives form this fund from the unit parts of their owners.
Equity Functions
The authorized capital is a means of performing a number of functions in the company.
One of the main functions that this fund performs is the start of activities. This reflects the rights of owners to start their production activities. Regardless of the results of the work, the authorized capital of an enterprise is the most stable liability item.
The next function is the warranty properties. It is the authorized capital that provides the minimum necessary for insurance in case of need for settlements with creditors.
Another property of the authorized capital is the distribution function. It indicates what voting power belongs to the investor in managing the organization. The value of each share in the authorized capital determines the value of the property of the organization.
Minimum authorized capital
The minimum amount of authorized capital is constant and is established at the time of creation of the organization.
In the future, no one has the right to force a legal entity to increase this fund. The growth of the minimum wage (minimum wage) affects only newly organized enterprises. The minimum authorized capital is:
- for LLC - 10 thousand rubles;
- for CJSC - 1000 minimum wages;
- for OJSC - 1000 minimum wages;
- for state enterprises - 5000 minimum wages;
- for a municipal enterprise - 1000 minimum wages.
To carry out state registration, at least half of the size of the authorized capital must be paid. The company, according to the law, must be registered without an initial payment. 50% of the authorized capital of the company is repaid in the first 3 months of its operation. And after a year of operation, the entire fund is paid.
The authorized capital of a company is cash, material assets, property, and securities.
The composition of the authorized capital
The authorized capital of an organization is the source that forms the assets of the enterprise. The creation of the fund is carried out from the property of its founders - legal entities or individuals. Contributions may take the form of cash, property, and rights, such as leases. Limitations exist only for special types of organizations. So, banking institutions cannot form their authorized capital from securities.
The founder is obliged to contribute property to this fund without fail. Under no circumstances can he be relieved of his duty.
Formation process
The organization’s charter regulates the process of transferring property from founders to a legal entity. For limited and additional liability companies, these actions are also stipulated in the memorandum of association. The documents establish the responsibility of the founders for the untimely entry of their parts into the general fund.
Authorized capital is property valued by deciding on its value at a general meeting of founders. This is done by an independent appraiser and entered after general agreement in the documentation.
The transfer of values is carried out using the act of acceptance of the transfer. This document, together with the contributions reflected in the balance sheet of the legal entity, serves as evidence of the introduction of the authorized capital in the specified time.
When you repay your part in the enterprise’s fund, proof of the contribution of the founder is a certificate from the bank with a legal entity account.
The essence of the insurance function
The concept of authorized capital as property of an enterprise is rather arbitrary. In the realities of the modern organization of work of companies and partnerships, the contributed property is valued by agreement between shareholders. 
Prior to registration, a legal entity does not yet have a statutory fund. And after registration, the capital goes into circulation and can increase and decrease. Therefore, this fund is in reality financial and economic activities businesses lose their insurance function.
Due to such aspects, in some countries they refused to fix the size of the authorized capital. At the moment, 100 minimum wages cannot protect the rights of creditors, because in terms of money this value is only 490 dollars. USA.
How authorized capital is applied
Due to the inherent stability of the fund under consideration, it is directed to cover less liquid fixed assets.
Share capital is an asset, such as land, equipment, and real estate. For the newly established enterprise, the most popular balance sheet items covered by the established fund are fixed assets, fixed assets. The cost of such objects for a certain period of time is transferred to the cost of manufactured products in the form of depreciation.
To finance working capital, either short-term borrowed capital or retained earnings are used.
Installation capital of LLC and ODO
There are certain features of creating the authorized capital of limited and additional liability companies. He, according to Part 1 of Art. 90 of the Civil Code of the Russian Federation, consists of the contributions of its participants. Size and proportions are set in advance.
For such organizations, the authorized capital is a means that at the time of registration must be paid at least 50%. The second half is paid during the year the company operates.
If this does not happen, the company announces its liquidation or reduction of the authorized capital.
If after each year of operation the net assets have a lower value than the authorized capital, they are reduced in the manner prescribed by law.
Share capital of a joint stock company
According to paragraph 1 of Art. 99 of the Civil Code of the Russian Federation, the authorized capital consists of the net value of shares of the company that were acquired by its shareholders. When an OJSC is established, all its shares must be distributed among the founders.
An increase in the value of the authorized capital of a company occurs by increasing the nominal value of securities or issuing an additional number of shares.
With a decrease in the value of net assets, the same rules apply for JSCs as for LLCs and ODOs.
Debt coverage during the liquidation of the enterprise
The size of the authorized capital is the insurance fund of the enterprise from which the calculation of the legal entity with creditors is made.
However, depending on the type of company organization, liability in the event of a reorganization is not the same. Larger partnerships carry less responsibility than the owners of cooperatives. The latter are accountable to creditors along with the founders of companies with full responsibility.
The bulk of organizations have partial responsibility. Debt to creditors is returned from the amount of the authorized capital. As a rule, in the current conditions it is completely insufficient to pay off all obligations in the event of bankruptcy of the organization.
If the company’s own funds are not enough to pay off the debt, it falls credit rating. Such an enterprise is unattractive for investment and cannot rely on the expansion of production assets at the expense of credit funds. It is in the interests of a legal entity to maintain its credit rating at a high level due to a sufficient amount of equity, in particular authorized capital.
Cooperatives and limited liability companies cover their obligations to creditors with the personal property of all the founders of the partnership, their shares in other organizations.
Fund Size Changes
The authorized capital of an enterprise is a fixed value. However, there are cases when its size changes.
An increase in the authorized capital is possible only upon joining the organization of additional participants. The affiliated share of the authorized capital is one of the possible reasons for the increase in the fund. The issue of shares carried out after registration of a legal entity also affects the authorized capital.
Such changes are carried out strictly in accordance with the law and are documented. All cases of increasing the fund are registered in the relevant regulatory sources.
Additional funds can be attributed to the authorized capital after the sale of shares at a price that is higher than their nominal value. In the balance sheet, these funds are displayed in the “Additional capital” section. These tools increase the reliability rating of the company.
The authorized capital is the means by which the company must form Reserve capital. This fund should be at least 15% in relation to the authorized capital.
If the value of net acts for the period decreased and became lower than the cost of the authorized capital, the company announces a decrease in its authorized capital. Such actions lead to a decrease in the credit rating and reduce the reliability of the company in the eyes of investors.
Having considered the features of the formation and management of fixed assets of the enterprise, we can understand the principle of organization of company funds. Without it, the activity of a legal entity is impossible. Authorized capital is a fund created during the registration of an enterprise. Its value is regulated by law and acts as a guarantee of the solvency of the organization to investors. Fund changes affect the rating of the company in the eyes of creditors.
Authorized capital of a legal entity