Meaning of Share Capital: Share capital denotes the amount of capital raised by the issue of shares, by a company. It is collected through the issue of shares and remains with the company until its liquidation.
Share capital is owned capital of the company since it is the money of the shareholder and the shareholder are the owners of the company. The total share capital is divided into small parts and each part is called a share. Share is the smallest part of the total capital of a company.
Features of Share Capital:
Owned capital: Share capital is owned capital of the company. It is actually the money of the shareholders and since the shareholders are the owner of the company, so share capital is the owned capital.
Remains with the company: It remains with the company till its liquidation.
Dependable sources: Share capital is the most dependable source of finance for joint-stock companies.
Raises creditworthiness: It raised the creditworthiness of the company.
Substantial funds: It provides substantial funds to the company.
Available for: Share capital is easily available for expansion and diversification of business activities.
Amendment: The amount of share capital can be raised by amending the capital clause of the Memorandum of Association.
No charge: Share capital does not create any charge on the assets of the company.
Opportunity to participate: Share capital allow its shareholders to participate in the company's management with the normal rights of shareholders.
The benefit of bonus shares: It gives shareholders the benefit of bonus shares.
The benefit of limited liability: Share capital also gives its shareholders the befit of limited liability as the liability of its shareholders is limited up to the face value of each share.
Meaningful participation: Share capital enables its shareholders to have meaningful participation in the expansion of the corporate sector.
Types of Share Capital:
Authorized capital: It is the maximum amount of capital that a company can collect or raise by selling its shares to the general public. Authorized capital is known as nominal capital or registered capital. For example, A company wants to sell 100 shares of Rs. 10.00 each, so the total amount collected by the company is Rs. 1000.00.
The capital with which a company is registered is known as its authorized capital.
Issued capital: It is that part of the authorized capital which is actually issued to the general public. For example, A company has issued 80 shares of Rs. 10.00 each so the issued capital is Rs. 800.00
Unissued capital: It is that part of the authorized capital which is not being issued to the general public. That is, the company has not issued 20 shares of Rs. 10.00 each, so the unissued capital is Rs. 200.00.
Subscribed capital: It is that part of the issued capital which is actually subscribed by the general public. That is a company has issued 80 shares out of which 70 shares are being bought by the general public, so the subscribed capital is Rs. 700.00. That is 70 shares of Rs. 10.00 each.
Unsubscribed capital: This is part of the issued capital that is not subscribed to by the general public. That is if the company has issued 80 shares out of which 70 are bought by the general public and 10 are not being bought by them, so the unsubscribed capital is Rs. 100. That is 10 shares of Rs. 10 each.
Called up capital: It is that part of the subscribed capital that the company actually called up. For instance, if a company has asked its shareholders to pay Rs. 5.00 per share so on 70 shares, they have to pay Rs. 350.00. This is the called up capital.
Uncalled up capital: It is that part of the subscribed capital which is not being called up by the company. It may be called up as and when the company need funds. That is out of Rs. 10.00 per share, Rs. 5.00 per share is being called up by the company and Rs. 2.00 is being uncalled up and Rs. 3.00 is kept as reserve, which is yet to be called.
Reserve capital: Reserve capital is that part of the uncalled capital that is reserved to be called up only when winding up or liquidating the company. It cannot be called during the lifetime of a company. It is to be used only for meeting extraordinary situation such as the liquidation of the company. The purpose of reserve capital is to meet the interests of the creditors at the time of winding up of the company.
Paid-up capital: It is that part of the called up capital which is actually paid up by the shareholders. For example, out of 70 shares that were subscribed for 60 shareholders have paid up their call money, that is Rs. 300.00 is called the paid-up capital of the company.
Unpaid up capital: It is that part of the called up capital which is not being paid by the shareholders. For example: out of 70 shareholders, 60 shareholders have paid up their call money and 10 shareholders have not paid their call money, so Rs. 50.00 is called unpaid up capital. Unpaid up capital is also known as Calls in Arrears.
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