Types of share capital

What is share capital?

In case of the company, the owner's capital is divided into smaller units called 'shares', collectively known as share capital. Share capital refers the fund raised by company through issuing shares to the public.

         

Let, ABC company issued 10,000 shares of Rs 100 per share received Rs 10,00,000 in share capital.

        

It is long term source of finance which shareholders achieve a share of ownership of a company.

Types of share capital

There are different types of share capital are given below,

(a) Authorized Share Capital

The Authorized Share Capital is called as Registered Capital or Nominal Capital. It is the maximum amount of capital that can be issued by the company. 

It is mentioned in the Memorandum of Association(MOA). If a company wants to issue capital beyond authorized share capital, it will have to amend its MOA.

(b) Issued Share Capital

The company may not require all of the funds at the beginning period. So, its issues shares to the public depending upon its need. 

So, issued share capital is the part of Authorized Share Capital which is issued to public for subscription in the form of shares.

Therefore, Authorized Share Capital = Issued share + Unissued share

(c) Subscribed Share Capital

Subscribed share capital is the part of issued share capital which is actually bought by the public.

       

  So, Issued Share Capital = Subscribed capital + Unsubscribed capital

        

Suppose, ABC company issued 20,000 shares of Rs 50 each and the public bought 15,000 shares. So, issued capital would be(20,000×Rs 50)= Rs 10,00,000 and Subscribed capital would be(15,000× Rs 50)= Rs 7,50,000

(d) Called Up Capital

Called up capital is the part of Subscribed capital which has been paid by the shareholders. The company does not require all of the capital at once. It calls up only when needed in installments. The rest of the part of the Subscribed capital is called uncalled capital.

(e) Paid Up Capital

It is the part of called up capital which the shareholders pay is called paid up capital. Basically, paid up capital is the amount of money which is actually invested in the business. Some of shareholders may default in payment of known as calls in Arrears.

    

 So, paid up capital = called up capital - calls in arrears.

What is different between capital reserve and reserve capital?

Capital reserve is a sum earmarked for specific purposes or long term projects or mitigating capital losses or any other long term contingency. This amount belongs to the shareholders but cannot be distributed to them. 

Whereas reserve capital is the part of authorized share capital that has not yet called up by the company except in the event of the company being wound up and available only for the for creditors on the winding up of the company.