Company Law

All about shares and share capital: company law simplified

Share Capital would be our next topic of discussion.So by now we have a concept of what company is as per the law in our mind.If you have still not developed that concept kindly stop here , read the previous posts and come back. With this understanding we will dive deeper into the law to understand shares and share capital.

What do you understand by the word share capital ?

The entire capital of the company is divided into small units where each unit represents a part ownership interest in the company. The sum total of value of these small unit is the share capital of the company. These individual units are referred to as shares of the company.

The company issues these shares to raise capital for running the business. Now let us learn this concept with an example. Suppose a company wants to raise a sum of Rs. 1,00,000/- by issuing shares of Rs.10/- each. Here it is clearly understood that the company has to issue 1000 shares (100000 /10). Now each share will represent the ownership right of the shareholder in the company.

Company Law has classified Share Capital

The classification of share capital as per company law is done as given below

Nominal / Authorized / Registered Capital
Issued Capital
Subscribed Capital
Called up Capital
Paid – up Share Capital

Nominal Capital- (Relevant law -section 2(8) of Companies Act,2018) Such capital is the maximum amount of share capital the company is authorized by the Memorandum of Association to raise.

Issued Capital–(Relevant law- Section 2(50) of Companies Act,2013) This is the capital which the company issue from time to time for subscription and allotment.

Subscribed Capital – (Relevant law is section 2(86) of Companies Act,2013) It is the part of the issued capital which is subscribed by the subscriber of the shares of the company. All the issued share may not be subscribed.

Called-up capital – (Relevant law is section 2(15) of the Companies Act, 2013) It is the part of subscribed capital called up for payment by the company

Paid-up capital- (Relevant law is section 2(64) of the Companies Act,2013) Paid-up Capital is the part of issued capital which has been paid-up. It is the amount credited as amount paid-up in respect of shares issued.

Diagram to show relationship between the above discussed capital

Let us have a glance at the the table below to recap the concept

Terms	Brief
Authorized /Nominal Capital	Maximum amount of share capital the company is authorized by the Memorandum of Association
Issued Capital	Capital which the company issue from time to time for subscription and allotment
Subscribed Capital	Part of the issued capital which is subscribed by the subscriber of the shares of the company.
Called-up Capital	Part of subscribed capital called up for payment by the company.
Paid-up Capital	Part of issued capital which has been paid-up. It is the amount credited as amount paid-up in respect of shares issued.