Sunday, May 11, 2014

Share Capital and Its Types

Share Capital: The capital of a joint stock company is divided into shares which are collectively called ‘Share Capital’. Share capital refers to the amount that a company can raise or has raised by the issue of shares. The share capital may be classified as below:

1.    Nominal/Authorized/Registered Capital: This is the amount of the capital which is stated in Memorandum of Association and with which the company is registered. Nominal capital is the maximum amount which the company is authorised to raise from the public.

2.    Issued Capital: Issued capital is that part of the nominal capital, which is offered to the public for subscription. The balance of the nominal capital, which is not offered to the public for subscription, is called unissued capital.

3.    Subscribed Capital: Subscribed capital is that part of the issued capital, which is applied for by the public. The balance of the issued capital, which is not subscribed for by the public is called, unsubscribe capital.

4.    Called up Capital: This is the amount of the capital that the shareholders have been called to pay on the shares subscribed for by them. The amount of the subscribed capital, which is not called, is known as uncalled capital.


5.    Paid up Capital: This represents that part of the called up capital, which is actually received by the company. The amount of the called-up capital, which not paid by the shareholders, is called as unpaid capital or calls in arrears.


6.    Reserve Capital: A company may by special resolution determine that any portion of its share capital which has not been already called up shall not be capable of being called-up, except in the event of winding up of the company. Such type of share capital is known as reserve-capital.