Defining share capital and its types

Enterprise capital is called share capital. It is collected due to the release of shares.

DEFINITION OF SHARE.

A segment of share capital that represents the ownership of shareowners is known as a share.

CLASSIFICATION OF SHARES

The wealth of the company is divided into different units. The following are the kinds of share capital:-

1] NOMINAL OR AUTHORISED OR REGISTERED CAPITAL

Nominal capital is the sum of capital through which a firm plans to register. It is the maximum sum that is authorized and is limitless.

2] ISSUED CAPITAL

A portion of nominal capital is called issued capital. This amount is put forward for acceptance to individuals.

3] SUBSCRIBED CAPITAL

A part of the money that is released is known as subscribed capital. It is the sum in which applications are obtained by people.

4] CALLED UP CAPITAL

The sum of funds whose payment is yet to be done is known as called up capital. It is the portion of share capital that is appealed by an enterprise.

5] PAID UP CAPITAL

A segment of called-up capital is known as paid-up capital. This sum of capital is put forward and is remunerated by members. Equity and liabilities’ total amount includes the addition of paid-up capital because it is real capital that shareholders give to a company.

6] RESERVE CAPITAL

This capital is not asked by a company but is also a portion of the subscribed capital. There is a special resolution passed for this capital which tells that this amount will only be asked while winding up or dissolution of a firm.

HOW SHARES ARE RELEASED?

1. APPLICATION MONEY- Amount received on the proposal.
2. ALLOTMENT MONEY- Amount obtained upon distribution.
3. FIRST CALL MONEY– Foremost installment
4. SECOND CALL MONEY- Succeeding installment
5. FINAL CALL MONEY- Tertiary and last installment

METHODS TO RAISE CAPITAL

• At PAR– When shares have identical monetary value, i.e. shares are released in equal proportions at a similar cost.
• At PREMIUM- When shares have dissimilar monetary value, i.e. whatever the price of shares are; they are released at a cost higher than their face value.
• At DISCOUNT– When shares have different unit prices, i.e. whatever the cost of shares is; they are released at price lower than their face value.

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