Share Capital of Company
Share Capital means the amount invested by the owners of the company for running the business. Shareholders are considered as the owners of the Company. As there are more than one shareholder / owners in a company, the total capital of the company is divided in in to small units called ‘Share’ for ease of distribution and identification.
Share is defined as ‘a share in the share capital of a company’. A shareholder holds the proportion of the share capital which entitles him different rights in the company. Shareholders have to pay money to company as investment to obtain the shares of the company.
Shares are classified in to different classes depends on the rights and preferences attached to it. Shares are mainly divided in to Equity and Preference Capital. These types of capital differ on their right to vote on certain corporate matters.
Share Capital of the Company – Different Terms
- Authorised Share Capital
- Issued Share Capital
- Subscribed Share Capital
- Called up Share Capital
- Paid up Share Capital
What is Authorised Capital of Company?
The Authorised Capital is the maximum amount a company can raise from its shareholders as Share Capital. This amount is referred in Capital Clause of Memorandum of Association (MOA) of the Company.
In case the company is required to raise more capital, the company can increase the authorised capital by altering its MOA with the approval of its members. Company Registration fee payable to the Registrar of Companies and the stamp duty is dependent on Authorised Capital the company. Every time the company increases its Authorised Capital the incremental / additional registration fee and Stamp duty are payable to the office of Registrar of Companies.
Authorised Capital can be classified in to different classes of shares with face value not less than ₹ 1.00.
What is Issued Capital of Company?
Company can allocate a portion of its authorized capital from time to time to the investors and shareholder and collect capital investment by way of issue of shares. It is not necessary to issue full amount of authorized capital at a time. Issued Capital is the amount offered by the company from time to time proposed investors. It is issued by the company initially during incorporation and occasionally by way of allotment of shares for subscription. The issued share capital has to be always within the amount of authorized capital as mentioned in the memorandum.
Shares can be issued at face value (par value) or at a Premium. Also, the company has to issue Share Certificates to the shareholders with in 60 days of share issue.
What is Subscribed Capital of Company?
The total amount of capital that the investors / shareholders are greed to pay is called as subscribed capital of company. The subscribed capital shall be always equal or less than the issued capital of the company.
What is Called-Up Capital of Company?
The company free to collect the subscribed capital in instalments from shareholders.
Called-up capital refers to the particular amount of capital which has been called for payment. The company issuing the shares may call-up the capital partly or fully. If the shares are partly called, the remaining part is considered to be yet to be called and hence named as partly paid-up share capital. Once the shareholder pays the remaining amount of share capital, it is considered to be fully-paid up. This way of calling the shares relieves the burden on the investor from paying a lump sum amount of money at once.
What is Paid-up Capital of Company?
The paid-up capital refers to any amount of money which has been paid-up with respect to the shares which are being called by the company. The shareholders receive Shares in the company for the capital payments. Paid-up capital can never be more than the authorized capital of the company.
Display of Capital in Balance Sheet of Company
Classification of Share Capital
Authorised Capital of Company
Issued Capital of Company
Subscribed Capital of Company
Called up Capital of Company
Paid-up Capital of Company
Key points in this Table:
- Registered Capital is Rs.10 Lakhs
- Issued / Subscribed / Called up Capital is Rs.4 Lakhs
- Paid Up Capital is Rs.3 Lakhs Only. Company Can issue further shares up to Rs.6 Lakhs