According to section 2 46 of the companies act, 1956, a share is a share in the share capital of a company, and includes stock except where a distinction stock and shares is expressed or implied. Share capital definition and meaning collins english dictionary. We provide complete coaching for commerece and arts stream from class 12 to master degree level. Concept of corporate veil, applicability of companies act. Dynamic tutorials and services is a leading coaching centre of tinsukia district. The primary purpose of the legal capital rules is to regulate the conflict which potentially exists between creditors and shareholders in a company regarding how to allocate a companys capital, and to resolve that conflict in favour of the creditors.
In the example above, the issued share capital would be 2 shares 1 each to thiery and marlon. Such proceedings amount to reduction of capital but the act does not require court sanction for. Basic companies are likely to only have one share class and a limited number of shareholders but shares should be considered as a great way of offering additional rights to certain classes of people. Share capital classification and kinds methods of raising. Features of a company, kinds of company and share capital. Sep 24, 20 the share capital of companies limited by share shall be of two kinds, namely. A share is a share in the share capital of acompany, and includes stock receipt where there is adistinction between stock and shares is expresed orimplied. Nov 27, 2019 share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock. The certificate of incorporation of a company is issued by registrar of. This is not an example of the work produced by our law essay writing service. Therefore, a company must not reduce its share capital, except as prescribed by law. So what does a shareholder, member and holder of shares. Section 43 of the act provides that the share capital of a company limited by shares. Share capital equity invested by shareholders and investors.
Alteration of share capital under companies act, 20 ipleaders. Let us familiarize ourselves with the features of a company, kinds of company, and share capital of company. This capital maintenance rule is intended to protect a companys creditors by ensuring that the assets representing the capital of a. The share capital of the company is at the heart of the ownership structure and is therefore vitally important to get right. Company law has undergone radical changes over the past few years, so is the procedural requirements relating to compliance under various provisions of the.
S 77 a of company law sebi buyback of securities regulations 1998 private limited company and unlisted public limited company buyback of securities rules 1999 increase the underlying value of shares enhancing the earning per share eps reduce the excess share capital pay off surplus cash not required for the business prevent takeover. Apr 21, 2016 equity share are also called ordinary shares. In the example above, the unissued share capital would be 49,998 shares i. Legal capital in the uk following the companies act 2006 by. A companys share capital is the money that shareholders invest in order to start or. Accounting for share capit al share and share capital. In the event that the company requires more finance, section 121 of the companies act 1985 gives the company the power to increase its share capital by new shares of such amount as it thinks expedient. The company had passed a special resolution to be reregistered as a private limited company. Issued capital relevant law section 250 of companies act,20 this is the capital which the company issue from time to time for subscription and. Under ca06, holders of not less than 5% in nominal value of the companys issued share capital or not less than 50 of the companys members may apply to court for the cancellation of the reregistration resolution. The person who is the owner of the shares is called shareholder and the return he gets on his investment is called dividend.
Share capital and debentures cover institute of company. Share capital can consist of both common and preferred shares. Share capital refers to the funds that a company raises in exchange for issuing an ownership interest in the company in the form of shares. Companies act 1981 reregistration of unlimited liability company as company limited by shares or by guarantee certificate of incorporation to be conclusive evidence effect of memorandum and byelaws alterations in memorandum or byelaws increasing liability to contribute to share capital not to bind existing members without consent. A company has certain very unique features and characteristics. Shares are considered as goods under s 27 of the sale of goods act, 1930, and are moveable property, but are. As per law, the company is required to pass a special resolution to determine that any portion of its share capital, which has not been already calledup shall not be capable of being calledup except in the event of its winding up. There are two general types of share capital, which are common stock and preferred stock. It is a fundamental rule of english company law that a limited company having a share capital must maintain that capital. The memorandum of association of every company has. In this article, sashvat aggarwal, pursuing diploma in entrepreneurship administration and business laws from nujs, kolkata explains alteration of share capital under companies act, 20. Jan 09, 2017 rule 21 provides that an application to confirm a reduction of share capital of a company, shall be filed before the national company law tribunal tribunal for short in form no. This chapter deals with the accounting for share capital of companies.
The capital includes both the share capital, which is received when a company issues shares to shareholders as well as the loan capital, which the company obtains from issuing debentures to creditors2. In other words, the capital collected by a joint stock company for. As per section 43 a equity share capital may be divided on the basis of voting rights and differential rightsdvr as to dividend, voting rights or otherwise according to the rules. This act makes significant changes to uk company law, including the legal capital rules. According to companies act, 20 no change in the concept of types of share capital as in 1956 act. They are entitled to receive dividend as are declared by the board of directors.
Here, use of two terms shall be and and denote this is a requirement to have both kind of share capital but, according to further reading, company may have zero equity or preference share capital. Legal capital in the uk following the companies act 2006. Cancellation of shares in authorized share capital. The companys registered share capital is sek 97,275,4 represented by.
In other words, the amount of money collected by the company from its consumers to contribute to its capital is collectively known as share capital and individually known as shares. When total capital of a company is divided into shares, then it is called share capital. Share is defined in section 246 of the companies act, 1956 as, share means share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied. Judicial acceptance of the company as a separate legal entity. Share premium account can be used only for the following purposes. Alteration of share capital share repurchase financial. Who can bind the company to a contract, or make it liable in tort or criminal law. Takeovers and mergers of plcs insolvency and dissolution of companies.
A company cannot be registered as a public company unless it has a minimum allotted share capital of. Subdivision of share capital, d conversion of fully paidup shares into stock and e. The ordinary shareholders have voting rights in the meetings of the company. Define shares explain the different types of shares in detail. The amount of share capital or equity financing a company has can. Nelfi amiera mizan fol, mmu 2016 topic 4 shares capital i 4. It is a fundamental principle of company law that the share capital must be. This paper examines the economic case for rules of company law which regulate the raising and maintenance of share capital by companies. The doctrine of capital maintenance and its statutory developments. The capital of a company is separated into units of a fixed denomination and such unit is a share. At the time of registration of a company, the memorandum. Features of company as per indian companies act 1956, define a company or corporate body.
Share capital refers to the funds a company receives from selling ownership shares to the public. Power of unlimited company to provide for reserve share capital on reregistration. Share means a share in the share capital of a company and includes stock. Power of unlimited company to pmvide for resewe capital share on registration. It constitutes the basis of the capital structure of a company. There are two types of shares under indian company law. Part 4 share capital division 1 nature of shares 4. The primary purpose of the legal capital rules is to regulate the conflict which potentially exists between creditors and shareholders in a company regarding how to allocate a company s capital, and to resolve that conflict in favour of the creditors. Company law solutions provides an expert service for all aspects of share capital for private companies, including issuing and transferring shares, setting up different classes of shares, converting shares from one class to another, consolidating and subdividing shares, companies buying their own shares and reductions of capital.
When a company is created, if its only asset is the cash invested by the shareholders, the balance sheet is balanced on the right side through share capital, an equity account. The holders of equity shares are the real owners of a company. Capital of a company shareholders rights types of shares. The companys registered share capital is sek 97,275,4. A company usually raises its capital in the form of shares called share capital and debentures debt capital. Share capital means the money paid into the company or legally promised as being available on call by members for shares in the company. Share capital or issued share capital is the proportion of a companys equity that came from the sale of its shares to the shareholders for cash. Share capital is a major line item but is sometimes broken out by firms into the different types of equity equity accounts equity accounts consist of common stock. There are also rules in place when dealing with shares and these should. A share contains bundles of rights and obligations contained in the articles of association. Alteration of share capital and draft format of resolutions. The person who is the owner of the shares is called shareholder and the. In addition, the regulation of shares into par value and no par value shares is also the most important aspect of company law.
Share capital shareholders capital, equity capital, contributed capital, or paidin capital is the amount invested by a companys shareholders for use in the business. Notice to registrar of consolidation of share capital, conversion of shares into stock etc. Nature and transferability of shares 1 a share or other interest of a member in a company is personal property. The equity share capital cannot be redeemed during the life time of the company. Unissued share capital the remaining authorised share capital that has not been issued. Equity share capital, with reference to any company limited by shares, means all share capital which is not preference share capital. The current rules relating to share capital require companies having a share capital to. Share capital definition and meaning collins english. When a company is created, if its only asset is the cash invested by the shareholders, then the balance sheet is balanced through share capital. The company law also sanctions the creation of a reserve capital otherwise known as reserve liability.
The current rules relating to share capital require companies having a share capital to have a par value or a nominal value ascribed to their shares. Company to accept unpaid share capital, although not called up. A share is a type of securities the term securities is defined in section 281 of the companies act, which refers to the definition of the securities as given in clause h of section. Share capital is the backbone of the company without it the company cannot. About kumar nirmal prasad kumar nirmal prasad is the founder and ceo of dynamic tutorials and services. According to companies act, 20 no change in the concept of types of share. Share capital is the money a company raises by issuing shares of common or preferred stock. Share is defined in section 246 of the companies act, 1956 as, share. Company law multiple choice questions and answers dynamic. A share under the companies act, can either of rs10 or rs100 or any other value which may be the fixed by the memorandum of association of the company. Shares and typeskinds of shares in company law in india. Power to exempt class or classes of companies from provisions of this act.
The characteristics of common stock are defined by the state within which a company incorporates. A share is a type of securities the term securities is defined in section 281 of the companies act, which refers to the definition of the securities as given in clause h of section 2 of the securities contracts regulation act, 1956. Applicable provisions for alteration of share capital under companies act, 20. In the companies act 2006, in relation to a company, a companys issued share capital excluding any part of that capital which neither as respects dividends nor. Nature and types a company is an artificial person created by law, having separate entity with a perpetual succession and a common seal.
Nominal capital relevant law section 28 of companies act,2018 such capital is the maximum amount of share capital the company is authorized by the memorandum of association to raise. No nominal value 1 shares in a company have no nominal. The provisions of this act relating to the reduction of share capital of the company will apply as if the share account premium account were paid up share capital of the company. Advanced company law and practice this study material has been published to aid the students in preparing for the advance company law and practice paper of the cs professional programme. Company limited by shares issues and allots shares to a shareholder in return for capital money or assets how public company acquire public funding by offering or inviting public to subscribe to its securities shares. Share is defined in section 246 of the companies act, 1956 as, share means share in the share capital of a company, and includes stock except where a.
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