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Law Firm

Apr 11, 2024

Differences between Subscribed and Authorized Capital

Subscribed Capital (used before Charter capital, article 28)
It is worth noting that since 2022, new rules for registering statutory capital have been in effect in Georgia following the adoption of the new Law on Entrepreneurs.
The Law on Entrepreneurs (Article 28) defines the subscribed capital, which was previously known as the charter capital under the old legislation, as the monetary amount contributed by the founders of the company. Subscribed capital is the actual amount of funds received by the company from its founders. Subscribed capital establishes the minimum threshold of the company's financial liability and accountability to creditors.
The new rules state:Subscribed capital is not mandatory, and it can be added later only through a partnership agreement.Subscribed capital must be contributed in national currency.
Authorized capital (article 5.5, article 136.6)
Establishing the authorized capital is permissible only after the placement of the subscribed capital.
Authorized capital represents the potential opportunity to increase existing capital based on a partnership agreement, within which the company commits to issuing shares/ownership stakes in the future.The key difference between authorized and subscribed capital is that authorized capital signifies the potential for a company to augment its capital by issuing additional shares up to a set limit, while subscribed capital denotes the actual amount of capital already obtained by the company through contributions from shareholders.


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