Nature Of Share Capital
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Nature of Share Capital
The words capital and share capital are synonymous in the case of a joint company. Share capital means the capital raised by the company by issue of shares. Ins short, there is one consolidated capital account called share capital account. The companies limited by guarantee or unlimited companies need not have share capital. The term capital has different expressions or meanings such as : (i) Authorized or nominal or registered capital, (ii) Issued capital, (iii) Subscribed capital, (iv) Called up capital, (v) Paid up capital, (vi) Uncalled capital, (vii) Reserve capital.
(i) Authorized or nominal or registered capital: Authorized share capital is the maximum amount of share capital, mentioned in the memorandum of association, which the company is entitled to issue. The terms authorized, nominal and registered with reference to share capital are synonymous.
(ii) Issued capital: It is that portion of authorized share capital for which offers have been invited for subscription. This includes any bonus shares allotted by the corporate enterprise. It also includes shares allotted to vendors of assets or promoters for consideration other than cash. That portion of authorized share capital for which offers have not been invited for subscription is called
unissued share capital. The issued capital can never exceed its authorized capital.
(iii) Subscribed capital: It represents that part of the issued share capital which has actually been subscribed and allotted. This includes any bonus shares allotted by the corporate enterprise. it is also called allotted capital. It is immaterial whether the shares are fully paid or partly paid. It must be noted that where the shares issued for subscriptions are wholly subscribed for, the terms issued and subscribed capitals are the same.
(iv) Called-up capital: It is that part of the subscribed share capital which the company actually demands from the shareholders. For example, where Rs. 8 has been called upon each of 1,00,000 shares of the face value of Rs. 10, the called-up capital shall be Rs. 8,00,000. The security premium money is not a part of the called up share capital.
(v) Paid-up share capital: It represents, “that part of the subscribed share capital for which consideration in cash or otherwise has been received”. In other words, it means the total amount paid up or credited as paid up on the subscribed capital. Some of the shareholders may fail to pay the amount due from them on accounts of a call which is termed as calls-in-arrears or unpaid capital.
(vi) Uncalled share capital: It is that amount which is not yet demanded by the company on the shares subscribed and allotted and which the shareholders are liable to pay as and when called. Thus in the above case, the uncalled capital is Rs 2, 00, 000.
(vii) Reserve capital: It is that portion of the subscribed capital which has not been called up and which, the company has resolved by special resolution can be called up only in the event of and for the purpose of the company being wound up, that is, capital which has been reserved for winding up. Under Section 99 of the Companies Act the word ‘reserve capital’ has been substituted by the more accurate expression: “reserve liability of limited the business point of view, a company limited by guarantee and having a share capital. Capital so reserved cannot be dealt with any manner i.e., neither a company can borrow on the security of tits reserve capital nor can it be charged by the directors. Reserve capital may also be subjected to reduction.
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(i) Authorized or nominal or registered capital: Authorized share capital is the maximum amount of share capital, mentioned in the memorandum of association, which the company is entitled to issue. The terms authorized, nominal and registered with reference to share capital are synonymous.
(ii) Issued capital: It is that portion of authorized share capital for which offers have been invited for subscription. This includes any bonus shares allotted by the corporate enterprise. It also includes shares allotted to vendors of assets or promoters for consideration other than cash. That portion of authorized share capital for which offers have not been invited for subscription is called
unissued share capital. The issued capital can never exceed its authorized capital.
(iii) Subscribed capital: It represents that part of the issued share capital which has actually been subscribed and allotted. This includes any bonus shares allotted by the corporate enterprise. it is also called allotted capital. It is immaterial whether the shares are fully paid or partly paid. It must be noted that where the shares issued for subscriptions are wholly subscribed for, the terms issued and subscribed capitals are the same.
(iv) Called-up capital: It is that part of the subscribed share capital which the company actually demands from the shareholders. For example, where Rs. 8 has been called upon each of 1,00,000 shares of the face value of Rs. 10, the called-up capital shall be Rs. 8,00,000. The security premium money is not a part of the called up share capital.
(v) Paid-up share capital: It represents, “that part of the subscribed share capital for which consideration in cash or otherwise has been received”. In other words, it means the total amount paid up or credited as paid up on the subscribed capital. Some of the shareholders may fail to pay the amount due from them on accounts of a call which is termed as calls-in-arrears or unpaid capital.
(vi) Uncalled share capital: It is that amount which is not yet demanded by the company on the shares subscribed and allotted and which the shareholders are liable to pay as and when called. Thus in the above case, the uncalled capital is Rs 2, 00, 000.
(vii) Reserve capital: It is that portion of the subscribed capital which has not been called up and which, the company has resolved by special resolution can be called up only in the event of and for the purpose of the company being wound up, that is, capital which has been reserved for winding up. Under Section 99 of the Companies Act the word ‘reserve capital’ has been substituted by the more accurate expression: “reserve liability of limited the business point of view, a company limited by guarantee and having a share capital. Capital so reserved cannot be dealt with any manner i.e., neither a company can borrow on the security of tits reserve capital nor can it be charged by the directors. Reserve capital may also be subjected to reduction.
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