{"id":560,"date":"2019-09-30T09:42:19","date_gmt":"2019-09-30T09:42:19","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=560"},"modified":"2021-03-12T11:51:29","modified_gmt":"2021-03-12T06:21:29","slug":"5-kinds-of-share-capital","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/","title":{"rendered":"What are the Types of Share Capital? &#8211; Detailed Overview"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Share Capital is defined as the funds raised by the company through issuing shares to the public. In simple words, you can say that share capital is the money invested in a company by the shareholders. It is a long term source of finance through which shareholders gain a share of ownership in the company. Here in this article, we will have a look at the different kinds of Share Capital.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#Which_Act_States_the_Nature_of_Shares_or_Debentures\" >Which Act States the Nature of Shares or Debentures?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#What_are_the_Different_Types_of_Share_Capital\" >What are the Different Types of Share Capital?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#What_is_the_difference_between_Capital_Reserves_and_Reserve_Capital\" >What is the difference between Capital Reserves and Reserve Capital?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#Why_do_Companies_issue_Shares_to_the_Public\" >Why do Companies issue Shares to the Public?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#Why_do_Investors_buy_Shares_from_the_Company\" >Why do Investors buy Shares from the Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#Representation_of_Share_Capital_in_the_Balance_Sheet\" >Representation of\nShare Capital in the Balance Sheet&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/5-kinds-of-share-capital\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Which_Act_States_the_Nature_of_Shares_or_Debentures\"><\/span>Which Act States the Nature of Shares or Debentures?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Section 44 of the Companies Act, 2013<\/em><\/strong><sup><a rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/en.wikipedia.org\/wiki\/Companies_Act_2013\" target=\"_blank\"><em>[1]<\/em><\/a><\/sup> states that the Share or debentures or other interest of any member in a company shall be a movable property and transferable in the manner as prescribed in the Articles of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Different_Types_of_Share_Capital\"><\/span>What are the Different Types of Share Capital?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Following are the different types of Share Capital \u2013<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"676\" height=\"340\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/09\/image.png\" alt=\"Types of Share Capital\" class=\"wp-image-576\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/09\/image.png 676w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/09\/image-300x151.png 300w\" sizes=\"(max-width: 676px) 100vw, 676px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">1. Authorized\u00a0 Share Capital<\/h3>\n\n\n\n<p>Authorized\nShare Capital is the total Capital that a company accepts from its investors by\nissuing shares which are mentioned in the official document of the company. It\nis also called as Registered Capital or Nominal Capital because with this\nCapital a company is registered.<\/p>\n\n\n\n<p>According to Section\n2(8) of the Companies Act, 2013, the limit of Authorised Capital is given under the Capital Clause in the Memorandum of\nAssociation. The company\nhas the discretion to take the required steps necessary to increase the limit of authorised capital with the purpose of issuing more\nshares, but the company is not allowed to issue shares that are exceeding the limit of authorised capital\nin any case.<\/p>\n\n\n\n<p class=\"has-background has-luminous-vivid-amber-background-color\"><strong>Authorized Share = Issued Share + Unissued Share.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Issued Share Capital<\/h3>\n\n\n\n<p>Issued Share Capital is the part of Authorized Share Capital issued to the public for subscription. And this Act of issuing Share is called Issuance, allocation or allotment. In a simple way, you can say that Issued Share Capital is the subset of the Authorized Share Capital. After the allotment of shares, a subscriber becomes the shareholder.<\/p>\n\n\n\n<p class=\"has-background has-luminous-vivid-amber-background-color\"><strong>Issued Capital = Subscribed + Unsubscribed Capital<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Subscribed Capital<\/h3>\n\n\n\n<p>Subscribed\nCapital is the part of issued Capital which has been taken off by the public.\nIt is not mandatory that the issued Capital is fully subscribed to by the\npublic. It is that part of the issued Capital for which the application has\nbeen received by the company.\n\nLet\u2019s understand this with an example \u2013 If a company offers 16000 shares\nof Rs. One hundred each and the public applies only for 12000 shares, then the\nissued Capital would be Rs 16 lakh, and Subscribed Capital would be Rs 12 lakh.\nIssued Share is equal to the sum total of share outstanding and treasury\nshares.\n\n\n\n<\/p>\n\n\n\n<div class=\"shadow1 mb-3 mt-4\"><strong>NOTE:<\/strong> Once the Share has been issued and purchased by investors, these shares are called Shares Outstanding. This issuing of shares gives the shareholders ownership in the corporation. The Unsubscribed Share Capital can be called as the Treasury Shares. <\/div>\n\n\n\n<h3 class=\"wp-block-heading\">4. Called-Up Capital<\/h3>\n\n\n\n<p>Called up Capital is the part of the Subscribed Capital, which includes the amount paid by the shareholder. The company does not receive the entire amount of Capital at once. It calls upon the part of subscribed Capital when needed in installments. The remaining part of the Subscribed Capital is called Uncalled Capital.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Paid-Up Capital<\/h3>\n\n\n\n<p>The part\nof Called-up Capital which is paid by the shareholder is called Paid-up\nCapital. It is not mandatory that the amount called by the company is paid by\nthe shareholder. The shareholder may pay half the amount of the called up\nCapital, which is called as Reserved Capital.&nbsp; As the name reserve means\nto keep some amount in the treasury of the company. This is quite useful in\ncase of winding- up of the company. <\/p>\n\n\n\n<p>The Companies Amendment Act 2015, has amended that\nminimum requirement of the paid up capital is not required in the Company. That\nsignifies that at present the formation of the Company can be done with even\nRs.1000 as the company\u2019s paid up capital. The paid up capital shall always be\nless than or it can be equal to the authorised share capital at any point of\ntime and the Company is not allowed to issue shares beyond the company\u2019s authorised\nshare capital. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/alteration-in-article-of-association\/\">What is Article Of Association and Alteration in AOA?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_difference_between_Capital_Reserves_and_Reserve_Capital\"><\/span>What is the difference between Capital Reserves and Reserve Capital?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is a clear difference between Capital Reserve and Reserve Capital. Capital Reserve is the part of profit reserved by the company for a particular business purpose or to finance long term projects. Whereas, the Reserve Capital is the part of the Authorized Capital that has not yet called up by the company and is available for drawing anytime when necessary.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_do_Companies_issue_Shares_to_the_Public\"><\/span>Why do Companies issue Shares to the Public?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Company issue shares to the public in order to raise capital or to finance their business operations, expand the business, and meet other financial needs. After the acceptance of shares by the company, the applicant becomes shareholders in the company, and they get the voting right on the matters of the corporate policy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Expansion and Strengthening<\/h3>\n\n\n\n<p>Startup companies and young corporations issue shares to external investors to raise money for expansion. Equity does not require repayment; hence, stress on the company is reduced. Also, the company issue shares in order to retire existing debts.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Raising Startup Capital<\/h3>\n\n\n\n<p>Early-stage companies require funding for various kinds of reasons, either for infrastructure costs, rent, security deposits, insurance, marketing, business travel, equipment, and furniture. This can be achieved by issuing shares to the public.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_do_Investors_buy_Shares_from_the_Company\"><\/span>Why do Investors buy Shares from the Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You must\nhave heard from many that shares are the best long term investments for an\nindividual. But at the same time, it involves risk too.<\/p>\n\n\n\n<p>Investors buying shares in companies generate wealth for themselves in the form of return on their investment. Return on these investments comes from dividend distributions that increase the share value.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Representation_of_Share_Capital_in_the_Balance_Sheet\"><\/span>Representation of\nShare Capital in the Balance Sheet&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In general, the share capital can be seen in the balance sheet\nof the company under the \u2018shareholder\u2019s fund\u2019 heading. The paid-up capital is regarded as the real capital as it signifies the amount as paid by the shareholders. In addition, it is also added to the balance sheets liabilities\nside to complete the column.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Companies issue shares in order to raise funds by diluting the ownership interest of the original shareholders. The share prices may go high and low at some time. So it\u2019s better to invest in the share market in a wise way. Also, many people get confused between shares and shares capital.\u00a0 Share capital is the fund raised by a company through the sale of equity to investors, whereas Share is the proportion of the amount paid by the shareholder in the company.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/provisions-for-the-allotment-of-securities-by-a-company\/\">Provisions for the Allotment of Securities by a Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Share Capital is defined as the funds raised by the company through issuing shares to the public. In simple words, you can say that share capital is the money invested in a company by the shareholders. It is a long term source of finance through which shareholders gain a share of ownership in the company. [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":570,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[160],"tags":[121],"acf":{"service_id":"1"},"authorName":"Shalini Singh","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2019\/09\/MEE.jpeg","authorDescription":"Shalini is a B.tech graduate but her keen interest in writing impelled her to continue as a content writer. Further, She has a rich experience in Companies Act and Ammendment related topics.","postViews":121616,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/560"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=560"}],"version-history":[{"count":25,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/560\/revisions"}],"predecessor-version":[{"id":27322,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/560\/revisions\/27322"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/570"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=560"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=560"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=560"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}