Question

Explain in brief the main categories in which the share capital of a company is divided.

Answer 1

Share capital of a company can be divided into the following categories:

(i) Authorised Capital : It refers to that amount which is laid down in the clause of the memorandum of association of the company. This is the maximum amount with which company is registered and authorised to raise from the public by the issue of shares. The amount is therefore, called the registered or nominal or authorised capital of the company.

(ii) Issued Capital : The authorised capital which is offered to the public for subscription including shares offered to the vendors for subscription other than cash is called the issued capital.

(iii) Subscribed Capital : It is the portion of issued capital which has been subscribed by the public i.e., applied for and allotted by the company. Thus, face value of allotted shares is known as subscribed capital.

(iv) Called-up Capital : The portion of the subscribed capital which is called upon from the shareholders is termed as called-up capital of the company. The company usually does not require a shareholder to pay in one lot, the full value of the shares he has subscribed for. He is generally required to pay it in installments. The balance of subscribed capital which has not been called-up represents uncalled capital.

(v) Paid-up Capital : The amount of called-up capital which has been actually paid by the shareholders is called as paid-up capital and the amounts yet due from the shareholders are called as calls-in-arrears.

(vi) Reserve Capital : Sometimes a company by means of special resolution decides that certain portion of its uncalled capital shall not be called-up during existence of the company and it would be available as an additional security to its creditors in the event of its liquidation. Such a portion of uncalled capital is termed as reserve capital.