What Is Share Capital?

Meaning of Share Capital

Share Capital means the capital of a company, or the figure in terms of so many rupees divided into shares of a fixed amount, or the money raised by the issue of shares by a company.

A public company and its subsidiary can issue only two kinds of shares, viz., preference and equity. Therefore,such a company can have only two kinds of share capital by issue of preference shares and equity shares. The share capital of a company may be of two kinds:

share capital types

a. Preference share capital

It is the sum total of the nominal value of preference shares of company.

b. Equity shares

it is the sum total of the nominal value of value of equity shares of a company.

Schedule VI of the companies Act requires that the share capital of a company should be classified in the balance sheet into the following three categories:

1. Authorized share capital: It is the maximum amount of share capital which a company can rise for the time being. It is mentioned in the company’s memorandum and is also termed as ‘Nominal’ or ‘Registered’ capital.

2. Issued share capital: It is that part of the authorised capital which is represented by the nominal value of:

  1. The share allotted for cash.
  2. The share allotted for consideration other than cash.
  3. The share subscribed for by the signatories to the company’s memorandum.

3. Called-up-capital: This is that part of the issued capital which has been called-up on the shares.

4. Paid-Up Capital: This is that part of the issued capital which has been paid-up by the shareholders or which is credited as paid-up on the shares.

5. Uncalled Capital: This is the remainder of the issued capital which has not been called. The company may call this amount any time,but this is subject to the terms of issue of shares and the provisions of the Articles.

6. Reserve Capital: That part of the uncalled capital which can be called only at the time of and for the purpose of winding-up of the company is known as reserve capital. it is available only for the creditors on the winding-up of the company.