Different Types Of Share Capital English

Different Types Of Share Capital

Different Types Of Share Capital are as follows:

  • Authorized Share Capital
  • Issued Share Capital
  • Subscribed Share Capital
  • Paid-up Capital
  • Reserve Share Capital

Content:

What Is Share Capital?

Share capital is funds raised by a company through selling shares to investors, serving as crucial equity financing. It’s not repayable like loans, offering shareholders an ownership stake and claims on profits and assets, and underpins the company’s financial health and strategic growth initiatives.

Types Of Share Capital 

Types of share capital include authorized (maximum stock a company can sell), issued (shares sold and paid for), subscribed (shares investors commit to buy), paid-up (actual funds received for shares), and reserve (unissued capital reserved for future needs or specific purposes).

Authorized Share Capital

Authorized share capital is the total amount of stock a company can sell to shareholders. It serves as a limit that a company cannot exceed without shareholder approval, ensuring that potential investors know the maximum amount of share dilution.

Issued Share Capital

Issued share capital is the actual value of shares distributed to shareholders and for which payment has been made. It is a portion of the authorized capital that can increase up to the authorized limit through the issuance of new shares.

Subscribed Share Capital 

Subscribed share capital refers to the number of shares that investors have agreed to purchase and for which the company has allotted them. It is a promise by shareholders to contribute capital that may be called upon by the company.

Paid-up Capital

Paid-up capital indicates the actual amount of money that the company has received from shareholders in return for shares of the company. It reflects the funds that are truly available to the company for its operations and growth initiatives.

Reserve Share Capital

Reserve share capital is the portion of the authorized share capital that is not issued immediately and is reserved for specific purposes or future needs, such as conversion of debentures or fulfilling options given to employees under stock option plans.

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Different Types Of Share Capital- Quick Summary

  • Share capital is categorized into distinct types, which include Authorised Share Capital, Issued Share Capital, Subscribed Share Capital, Paid-up Capital, and Reserve Share Capital.
  • Share Capital is the total amount a company raises through issuing shares to shareholders, representing the company’s equity financing. Share capital forms the basis of a company’s equity structure, is crucial for its operations and growth, and signifies the initial investment by owners.
  • Authorized Share Capital is the maximum stock amount a company is allowed to sell, limiting share dilution. 
  • Issued Share Capital is the value of shares distributed to shareholders and paid for, a portion of the authorized capital.
  • Subscribed Share Capital are shares that investors have agreed to buy and have been allotted by the company. 
  • Paid-up Capital is the amount received from shareholders for the company’s shares, indicating available funds for operations and growth.
  • Reserve Share Capital is part of the authorized capital that is not immediately issued and is reserved for specific purposes like debenture conversion or employee stock options.
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Types Of Share Capital  – FAQs  

What are the types of share capital?

Types of share capital are as follows:

  • Authorized Share Capital
  • Issued Share Capital
  • Subscribed Share Capital
  • Paid-up Capital
  • Reserve Share Capital

What is share capital formula?

The share capital formula is: Total Issued Shares x Par Value per Share. It calculates the total value of shares issued by a company.

Why is share capital important?

Share capital is important because it represents the owners’ initial investment in a company. It provides the financial base for the company’s operations and growth. Shareholders’ funds help the company absorb losses and support its activities.

We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, commodity and hence we bring you the important topics and areas that you should know:

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