Different types of Share Capital

The term “share capital” refers to the money that a corporation raises from investors by issuing shares to them. 

Share capital is made up of money raised through the issuance of shares for cash or non-monetary considerations.

Share capital is needed by businesses in order to finance their operations. 

The issue of additional shares will raise the company’s share capital.

Equity share capital and preference share capital are the two types of share capital. 

Preference share capital is acquired through the issuance of preference shares, whereas equity share capital is obtained through the raising of funds from investors.

Authorized, issued, subscribed, called-up, and paid-up share capital are several types of share capital

  1. Authorized Capital: The amount of share capital for which a corporation is permitted to issue its Memorandum of Association is known as authorised capital. The amount of capital that is specified in the Memorandum of Association is the maximum that the firm may raise. It isoften referred to as nominal or registered capital.
  2. Issued Capital: This is the component of the authorised capital that is typically made available to the public for subscription and consists of the shares that have been allotted to the merchants and endorsers on the enterprise’s memorandum.
  3. Subscribed Capital: Investors in the company subscribe for a portion of the issued capital that is referred to as subscribed capital. It represents the actual sum of money that the investors have borrowed.
  4. Called up Capital: Called up capital refers to the unpaid share capital that the stockholders still owe. The corporation is requesting payment of that particular portion of the share capital
  5. PaidUp:The part of calledup capital that has been paid for by the shareholder is known as paidup capital.The shareholder is not required to pay the amount that the corporation has demanded.The corporation may accept from the shareholder half of the called-up capital, also known as reserved capital.

CONCLUSION

Companies issue shares to raise money by diluting the ownership stake of the original stockholders. 

The cost of a stock may occasionally change. As a result, it is best to make informed stock market investments. 

In addition, the contrast between shares and shares capital confuses a lot of individuals. 

While a shareholder’s share is the portion of the money given to the company, a corporation’s share capital is the money raised through the sale of stock to investors.

BIBLIOGRAPHY

  1. https://byjus.com/commerce/categories-of-share-capital/
  2. https://www.legalraasta.com/blog/types-of-share-capital/

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