What is the share capital of the company?
Share capital means a share of the total capital of the company. Capital means the investment made in the company to start the business activity. Shareholders or members of the company invest their money in the form of capital to start the company. They invest money either as equity share capital or as a preference share capital. The shareholder will become the owner of the company for that portion of the amount which he invests in the company.
As per law share capital means “a share in the share capital of the company and includes stocks.”
The share capital of the company is divided into different stages and these are:
- Authorized Share Capital
- Issued Share Capital
- Subscribed Share Capital
- Paid-up Share Capital
Authorized Share Capital
The maximum amount limit of capital which a company can invest in the company during its tenure. The shareholders cannot invest funds more than the authorized capital of the company mentioned in the Memorandum of Association of the Company. Whenever the company raises capital it will raise from the authorized capital.
“Means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.”
Can authorized capital be increased or decreased?
Yes, this is possible under companies act, 2013 there is a provision regarding alteration in the capital of the company. The company anytime during its tenure can change the capital structure of the company by taking consent from directors in a board meeting of the company and from shareholders of the company in the general meeting. They also, have to submit forms to the central government(ROC).
For increasing the capital the only the intimation to the ROC is required but for reducing the capital approval of government is required.
Issued Share Capital
“means such capital as the company issues from time to time for the subscription.”
It means the capital which is issued from the authorized capital of the company to shareholders for subscribing and investing in the company. Issued capital cannot be more than authorized capital.
Subscribed Share Capital
“means such part of the capital which is for the time being subscribed by the members of the company.”
It means the members are ready to take the shares issued by the company. The member or shareholder can subscribe to any number of shares as per their own choice or to the minimum amount fixed by the company. Subscribing share means making application to the company showing their willingness to buy the shares and make a contribution towards the business of the company.
Paid-up Share Capital
“means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid up in respect of amount issued and also includes any amount credited as paid up in respect of share of the company, but does not includes any amount received in respect of such shares, by whatever name called.”
It is part of issued capital means it is that part of capital for which the members show their willingness to buy and also made the payment. If any members file an application for subscribing the shares and fail to pay the amount for such shares that shares will become unpaid-up share capital.