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. |
By now you have got a grasp of the following
- Concept of Share Capital
- Types of Capital
- Relationship between the capitals
Now we have made the momentum of learning the shares. We will keep this momentum going in the next post with the same topic discussed in more details
to be contd…
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