SHARES

• Meaning of share Capital.

 Share capital is the sum of money received by a company by selling its shares to the investors.

 When a company issues fresh share to the investors and raises fund, it directly increases the value of share
Share capital
 Share capital is shown on the balance sheet of a company.
Share capital can be categorized in authorized share capital, issued share capital, subscribed share capital, called up share capital and paid
up share capital.

• Authorized share capital

1. Authorized share capital refers to the total capital that a company is authorized to accept from investors by issuing shares.
2. In simple terms, a company cannot raise capital more than its authorized capital.
3. It represents the capital with which a company is registered that’s why it is also known as ‘registered capital’.

• Issued share capital:

1. It represents that part of total authorized share capital which has been issued by a company for subscription by investors.
2. The part which is issued represents the issued share capital.

• Subscribed share capital

1. It refers to that part of issued share capital, which has been subscribed by investors.
2. The part of issued share capital for which subscription has been received is known as subscribed share capital.
3. So subscribed share capital can be equal to subscribed share capital but not more than that.
 • Called up share capital

1. A company collects the full amount of share price in more than one lot.

2. The part of subscribed share capital which has been asked for payment represents called up
share capital.
• Paid up share capital

1. It represents that part of called up share capital which has been paid by investors.

2. Paid up capital = Called up capital – Call in arrears.

 Example

Suppose ABC Ltd. is registered with a capital of Rs 1 crore divided into shares of Rs 10 each. It issues 8 lakh shares
to raise a fund of Rs 80 lakh but investors subscribe for 6 lakh shares. The company calls for Rs 4 per share out of
Rs 10 (Nominal value of shares) and it receives payment for only 5 lakh and 50 thousands shares.
Now,
• Authorized share capital (10 lakh shares of 10 each) = 1 crore
• Issued share capital (8 lakh shares of 10 each) = 80 lakh
• Subscribed share capital (6 lakh shares of 10 each) = 60 lakh
• Called up share capital (6 lakh × 4) = 24 lakh
• Paid up share capital (5 lakh and 50 thousand × 4) = 22 lakh
• Call in arrears (50 thousand × 4) = 2 lakh
 KINDS OF SHARES

The share capital of companies limited by share shall be of two kinds, namely;
(a) Equity share capital.
(b) Preference share capital.
Equity share capital.
“Equity share capital” means all share capital which is not preference share capital.

Equity share capital may be of divided into

(i) Equity share capital With voting right; or

(ii) Equity share capital with differential rights.

Preference share capital.

Preference share capital of the issued share capital of the company carries preference right with respect to two factors
(a) Payment of dividend, either as a fixed amount or an amount calculated at a fixed rate. Which may be either be free of
or subject to income tax; and
(b) Repayment of amount of share capital or share capital deemed to be paid up, whether or not, there is preferential
right specified in the memorandum or article of the company.
  NATURE OF SHARES OR DEBENTURES (SECTION 44):
The shares or debentures of any member in a company shall be movable property transferable in the manner provided by the articles of the
company.

 NUMBERING OF SHARES (SECTION 45):

Every share in a company having a share capital shall be distinguished by its distinctive number.

 CERTIFICATE OF SHARES (SECTION 46):

A certificate, issued under the common seal of the company, specifying the shares held by any person, shall be prima facie evidence of the title of
the person to such shares.

 Duplicate Certificate of Shares:

A duplicate certificate of shares may be issued, if such certificate —

(a) is proved to have been lost or destroyed; or

(b) has been defaced, mutilated or torn and is surrendered to the company.