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Share Capital and Its types

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Share Capital:

Share Capital is the money a company raises from issuing preferred or common stock shares. A company's share capital or equity financing can change over time. When a company wishes to raise more equity, it can obtain authorization to issue new shares to existing or new shareholders.

In other word “share capital is the ownership capital of a company raised by the issue of its shares. It is an amount invested by the shareholders towards the nominal value of shares. A company needs share capital in order to finance its activities."

Different types of Share Capital:

Authorized or registered capital:

Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the business.  For example, if a company has 20,000 authorized shares at the rate of Rs. 100 each, the total authorized share capital will be Rs. 2,000,000. The authorized capital is also known as nominal capital.

Issued capital:

It is the part of the authorized capital, which is actually offered to the public for subscription. It is the face value of the shares that have been issued to the shareholders. Issued share capital and share premium represent the amount invested by the shareholders in the company.

Subscribed capital:

It is that part of the issued capital, which is actually taken up by the investors. Subscribed capital means the amount of capital for which written commitments were received from bank shareholders (stockholders) for the contribution of funds under subscription to shares (stock).

Called-up capital:

The amount of share capital due on shares is normally collected from the shareholders in instalments at different intervals. The called-up capital is that part of the nominal values of shares subscribed by shareholders, which is requested by the company for payment. The uncalled capital if retained by the company to be called up for the payment of creditors on liquidation is treated as reserve capital.

Paid-up capital:

It is the part of called-up capital, which has been actually received from the company’s shareholders. Paid-up capital is the amount of money a company has been paid from shareholders in exchange for shares of its stock. Paid-up capital is created when a company sells its shares on the primary market, directly to investors. Paid-up capital is important because it's capital that is not borrowed. A company that is fully paid-up has sold all available shares and thus cannot increase its capital unless it borrows money by taking on debt.