SHARE CAPITAL OF A COMPANY

 SHARE CAPITAL OF A COMPANY

Under the Companies Act, 2013, share capital refers to the total capital raised by a company by issuing shares to shareholders. It represents the ownership stake of shareholders in the company and serves as a key source of funding for the company's operations, growth, and expansion. Here are some key points regarding share capital under the Companies Act, 2013:

 

1. Types of Share Capital:

   - Authorized Share Capital: This is the maximum amount of share capital a company is authorized to issue as per its Memorandum of Association (MOA). It represents the upper limit of the company's share capital, and any increase in authorized share capital requires approval from shareholders and regulatory authorities.

   - Issued Share Capital: This refers to the portion of authorized share capital that has been issued by the company to shareholders through the sale of shares. It represents the actual amount of capital raised by the company from investors.

   - Subscribed Share Capital: Subscribed share capital is the portion of issued share capital for which shareholders have subscribed or agreed to subscribe. It may be equal to or less than the issued share capital, depending on the extent to which shareholders have agreed to acquire shares.

   - Paid-up Share Capital: Paid-up share capital is the portion of subscribed share capital for which shareholders have made payment to the company. It represents the actual funds received by the company from shareholders in exchange for shares.

 

2. Classes of Share Capital:

   - Companies may have different classes of shares, such as equity shares, preference shares, or other types of shares, each carrying different rights, privileges, and restrictions as specified in the company's Articles of Association (AOA) and the terms of issue.

 

3. Increase or Reduction of Share Capital:

   - Companies may increase their share capital by issuing additional shares to existing shareholders through rights issues or to new investors through public or private placements. Any increase in share capital requires compliance with regulatory provisions and approval from shareholders.

   - Share capital can also be reduced through methods such as buyback of shares, reduction of share premium account, or cancellation of shares. Reduction of share capital requires approval from shareholders and may involve court approval in certain cases.

 

4. Reporting and Disclosure:

   - Companies must maintain proper records of share capital, including details of authorized, issued, subscribed, and paid-up share capital, by the Companies Act, 2013 provisions.

   - Share capital details are disclosed in the company's financial statements, including the balance sheet, notes to accounts, and other relevant disclosures, providing transparency to shareholders and stakeholders regarding the company's capital structure and financing activities.

 

Overall, share capital plays a crucial role in the structure and functioning of companies under the Companies Act, of 2013, serving as a key mechanism for raising funds and allocating ownership rights among shareholders.

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