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SHARE CAPITALSHARE CAPITAL
AND TYPES OFAND TYPES OF
SHARESSHARES
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SHARE CAPITALSHARE CAPITAL
The capital of a company is called share capital.It is the
capital raised by the issue of shares.The share capital of
company is divided into small and equal units.Each unit
is called a share.A person who buys a share is called theshareholder or member of the company.Thus the
amounts invested by the shareholders towards the face
value of shares are collectively called share capital.The
share capital divided into following categories.
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CATEGORIESCATEGORIES
AUTHORISED CAPITAL
ISSUED CAPITAL
SUBSCRIBED CAPITAL
CALLED UP CAPITAL
PAID UP CAPITAL
RESERVE CAPITAL
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AUTHORISED CAPITALAUTHORISED CAPITAL
The capital with which a company is registered is called
the authorised capital.It is the amount mentioned in the
memorandum.It is the maximum amount of capital that a
company can issue.It is also called registered capital.
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ISSUED CAPITALISSUED CAPITAL
It is the part of the authorised capital which is issued to
the public.The remaining part of the authorised capital is
known as unissued capital which can be issued later on
or whenever there is need for additional capital.
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SUBSCRIBED CAPITALSUBSCRIBED CAPITAL
It is that portion of the issued capital which is subscribed
by the public.The balance of the issued capital is called
unsubscribed capital.
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CALLED UP CAPITALCALLED UP CAPITAL
It is the amount of the subscribed capital which the
directors have called up on the shareholders to pay.A
company may not requir the full amount at once on the
shares subscribed by shareholders.Therefore it may callup only such portion as it needs.The portion of issued
capital which as not yet been called up by the company
is called uncalled capital.
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PAID UP CAPITALPAID UP CAPITAL
It is that portion of the called up capital which has
actually been paid up by the shareholders.Any unpaid
balance on the called up capital is known as unpaid
capital or calls in arrears.
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RESERVE CAPITALRESERVE CAPITAL
A limited company by passing a special resolution may
set apart a portion of the uncalled capital as reserve
capital.Reserve capital is that portion of the uncalled
capital which is kept in reserve and which will be called
up only on winding up of the capital.
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TYPES OF SHARESTYPES OF SHARES
PREFERENCE SHARES
EQUITY SHARES
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PREFERENCE SHARESPREFERENCE SHARES
Preference shares are those which carry a
preferential right in respect of payment of
dividends and repayment of capital in the
event of winding up. The rate of dividend
on preference shares is fixed.
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TYPES OF PREFERENCE SHARESTYPES OF PREFERENCE SHARES
Cumulative preference shares: In case of cumulative preferenceshares,the arrears of dividend,if any,are carried forward and paid out of theprofits of the subsequent years
Non-Cumulative preference shares:In the case of non cumulativepreference shares the arrears of dividend do not accumulate . This meansthat if in any year company cannot pay the dividend in full due to
inadequacy of profit this shares do not get arrears of dividend out of profit ofsubsequent years.
Participating preference shares: In addition to a fixed rate of dividendthese shares have the right to participate in the surplus profit left afterpaying a reasonable rate of dividend on equity shares.
Non-Participating Preference Shares: these shares get only a fixed rateof dividend. These do not get share in the surplus profit.
Redeemable Preference Shares: These shares are repayble after theexpiry of the fixed period or at the portion of the company .
Convertible Preference shares: This shares are given in the right ofconvertion into equity shares with in a specified period or at a specified dateacording to terms of issue.
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EQUITY SHARESEQUITY SHARES
Equity shares are those which are not preference
shares.These shares do not carry any preferential right
in respect of dividend or repayment of capital.Dividend
on equity shares is paid after payment of the fixed rate of
dividend on preference shares.The rate of dividend on
equity shares is not fixed.It varies according to the
amount of profit the company earns.In the event of
winding up the equity capital is repaid last.However
equity shareholders full voting power.
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