Basics of share capital and its components.

1. SHARE CAPITAL, CAPITAL STOCK
& IT’S COMPONENTS
SEMINAR BY
-RUNALY MISQUITH
-ROHAN MONIS

2. (Meaning)
A joint stock company should have capital in
order to finance its activities. It raises its
capital by issue of shares.
• The M.O.A. must state the amount of capital with
which the company is desired to be registered and
the number of shares into which it is to be divided.
• When total capital of a company is divided into
shares, then it is called Share capital.
• Share capital is the total amount of capital collected
from its shareholders for achieving the common goal

3. TYPES

4. 1. Authorized, registered, maximum
or normal capital
• The maximum amount of capital, which a
company is authorized to raise from the public
by the issue of shares, is known as authorized
capital.
• It is a capital with which a company is
registered, therefore it is also known as
registered capital.

5. 2.Issued Capital
• Generally, a company does not issue its authorized
capital to the public for subscription, but issues a
part of it.
• So, issued capital is a part of authorized capital,
which is offered to the public for subscription,
including shares offered to the vendor for
consideration other than cash.
• The part of authorized capital not offered for
subscription to the public is known as 'un-issued
capital'.
• Such capital can be offered to the public at a later
date.

6. 3.Subscribed Capital
• It can not be said that the entire issued capital
will be taken up or subscribed by the public.
• It may be subscribed in full or in part.
• The part of issued capital, which is subscribed by
the public, is known as subscribed capital

7. 4.Called Up Capital
• It is that part of subscribed capital, which is
called by the company to pay on shares allotted.
• It is not necessary for the company to call for the
entire amount on shares subscribed for by
shareholders.
• The amount, which is not called on subscribed
shares, is called uncalled capital.

8. 5. Paid-up Capital
• It is that part of called up capital, which actually
paid by the shareholders. Therefore it is known
as real capital of the company.
• Whenever a particular amount is called and a
shareholder fails to pay the amount fully or
partially, it is known an unpaid calls or calls in
arrears.
• Paid-up Capital = Called up capital - calls in
arrears

9. • It is that part of uncalled capital which has been
reserved by the company by passing a special
resolution to be called only in the event of its
liquidation.
• This capital can not be called up during the
existence of the company
• It would be available only in the event of
liquidation as an additional security to the
creditors of the company

10. TERMS IN SHARE CAPITAL
CAPITAL STOCK :
The common and preferred stock a company is
authorized to issue, according to their corporate
charter.
Capital stock represents the size of the equity
position of a firm and can be found on the balance
sheet (or notes) of a typical financial statement.
Firms can both issue more capital stock, or
buyback shares that are currently owned by
shareholders.

11. SHARES
When a shareholder transfers shares,
he/she must complete a share transfer
form and send along with share
certificate to a company for recording
the change in share ownership.
Large companies which may have thousands of
shareholders appoint registrars and transfer agent
to handle the numerous ownership changes in the
company shares in electronic form to avoid
handling of too much of paperwork that is
associated with share transfers.
These are known as demat shares.

12. SHARE CERTIFICATE
The ownership of shares in a company is
evidenced by a share certificate that indicates the
kind and number of share as well as their
distinctive serial numbers.

13. PAR VALUE
 It represents the minimum amount that a
shareholder must pay on each shares.
The par value ( face value) of a company’s stock
constitutes the company’s legal minimum capital.

14. ACCOUNTING FOR SHARE CAPITAL
• PAR VALUE STOCK
• SHARE PREMIUM / SECURITIES PREMIUM
• NO-PAR STOCK

15. ISSUANCE OF SHARE CAPITAL WITH PAR
VALUE
• DEEPAK COMPANY ISSUES 1000 EQUITY
SHARES OF RS 10 PER EQUITY SHARES AT
RS 15 (INCLUDING PREMIUM RS 5)
REQUIRING FULL PAYMENT.
• CASH 15000
▫ EQUITY SHARE CAPITAL 10000
▫ SHARE PREMIUM 5000

16. ISSUANCE OF SHARE CAPITAL AT A
DISCOUNT
• DEEPAK COMPANY ISSUES ITS SHARES AT
RS 9.50 PER SHARE
• CASH 9500
• DISCOUNT ON ISSUE OF SC 500
▫ EQUITY SHARE CAPITAL 10000

17. ISSUANCE OF SHARE CAPITAL WITHOUT
PAR VALUE
• DEEPAK COMPANY ISSUED 1000 SHARES OF
NO PAR VALUE AT RS 15 PER SHARE
• CASH 15000
▫ EQUITY SHARE CAPITAL 15000
• CASH 15000
▫ EQUITY SHARE CAPITAL 7000
▫ SHARE PREMIUM 8000

18. ISSUANCE OF SHARE CAPITAL FOR NON
CASH ASSETS AND SERVICES
• DEEPAK COMPANY’S LAWYERS AGREE TO
ACCEPT 500 SHARES OF RS 10 PAR VALUE FOR
PREPARATION OF LEGAL DOCUMENTS AND
OTHER SERVICES RENDERED IN CONNECTION
WITH FORMATION OF THE COMPANY. THE
FAIR VALUE OF THE SERVICES IS RS 8000.
• PRELIMINARY EXPENSES 8000
▫ EQUITY SHARE CAPITAL 5000
▫ SHARE PREMIUM 3000

19. • DEEPAK COMPANY ISSUES 10,000 EQUITY
SHARES OF RS 10 EACH TO ACQUIRE A
PIECE OF LAND BUT THE FAIR VALUE OF
THE LAND IS NOT EVIDENT. IF THE
COMPANY’S SHARES TRADE AT RS 18
• LAND 180000
▫ EQUITY SHARE CAPITAL 100000
▫ SHARE PREMIUM 80000

20. RIGHTS ISSUE OF SHARE CAPITAL
• An existing shareholder who receives a rights
offer may
▫ Take up all the shares offered to him
▫ Take up less than the number of shares offered to
him
▫ Renounce his rights in favor of another person
▫ Not take up the rights offer

21. RECEIPT OF SHARE OF CAPITAL IN
INSTALLMENTS
• CASH
▫ SHARE APPLICATION AND ALLOTMENT
• SHARE APPLICATION AND ALLOTMENT
▫ EQUITY SHARE CAPITAL
▫ CASH
• CASH
▫ SHARE APPLICATION AND ALLOTMENT
• SHARE FIRST CALL
▫ EQUITY SHARE CAPITAL
• CASH
▫ SHARE FIRST CALL
• SHARE SECOND AND FINAL CALL
▫ EQUITY SHARE CAPITAL
• CASH
▫ SHARE SECOND AND FINAL CALL

22. FORFEITURE OF SHARES
• DEEPAK COMPANY DID NOT RECEIVE THE
AMOUNT OF SECOND CALL ON 100 SHARES
UNTIL DECEMBER 29 AND THE SHARES
WERE FORFEITED ON JANUARY 17.
• EQUITY SHARE CAPITAL 1000
▫ SHARES SECOND AND FINAL CALL 200
▫ SHARES FORFEITED 800