Share capital of a company :

Part I Schedule VI of the Companies Act 1956 deals with this aspect. Every business is expected to have a capital. Generally ‘capital’
means a particular amount of money used in the business for the purpose of earning revenue. In the context of the Company Law, the capital may be:

Nominal or Authorised Capital

This is the maximum amount of capital which a company is authorised to raise and is stated in the Memorandum of Association. Itcan also be called as ‘Registered Capital’.

For example : A Ltd has been incorporated with an Authorised Capital of Rs.10,00,000 divided into 1,00,000 shares of Rs.10 each.

Issued Capital

This represents part of the authorised capital, which is issued to public for subscription, say 60,000 shares of Rs.10 each.

The difference between the authorised capital and the issued capital represents unissued capital. This can be offered to the public at a later date.

Subscribed capital

This refers to that part of the issued capital which has been subscribed by the public, say 50,000 shares of Rs.10/- each.

Unsubscribed Capital
The difference between the issued capital and subscribed capital represents unsubscribed capital, say 10,000 shares of Rs.10/- each in the above example.

Called-up Capital

This refers to that part of the subscribed capital which has been called up by the company for payment.

For example: If 50,000 shares of Rs.10/- each have been subscribed by the public of which Rs.5/- per share has been called up,
then the subscribed capital of the company is Rs 5,00,000, of which the called up capital is Rs.2,50,000 ( Rs.5 x 50,000).

Uncalled capital

The difference between subscribed and called up capital is called uncalled capital. Taking the previous example, uncalled capital would be Rs.2,50,000 (Rs.5 x 50000).

Paid up capital

This refers to that part of the called-up capital, which has been actually paid up by the shareholders. Some of the shareholders might
have defaulted in paying a part of the called-up money. Such amount defaulted is known as calls-in-arrears.

In other words the difference between called-up capital and paidup capital is known as calls-in-arrears.

For example, one shareholder holding 500 shares failed to pay the call @ Rs.2 per share, then paid up capital is Rs.2,49,000, and calls-in-arrears is Rs.1000.

Reserve Capital

A company can reserve part of its uncalled capital to be called up only at the time of winding up. A special resolution has to be passed for that purpose. This is called Reserve Capital. It is not disclosed in the companies balance sheet.

The different types of share capital can, for the sake of simplicity diagramatically presented as follows:

Illustration :

A Company has been incorporated with an authorised capital of Rs.20,00,000 divided into 2,00,000 shares of Rs.10 each. It offered
1,90,000 shares to the public, but only 1,80,000 shares were subscribed for. The directors called for an amount of Rs.6 per share. All the amounts were received except the call money of Rs.2 on 1000 Shares. Calculate the amount of different categories of share capital.

 

Categories of capital	Amount Rs
Authorised 2,00,000 Shares of Rs.10 each	20,00,000
Issued 1,90,000 Shares of Rs.10 each	19,00,000
Subscribed 1,80,000 Shares of Rs.10 each	18,00,000
Called up 1,80,000 Shares of Rs. 6 each	10,80,000
Paid up (1,80,000 Shares x Rs.6) – (1000 shares @ Rs.2)	10,78,000
Calls in arrears 1,000 Shares of Rs. 2 each	2,000

 

A specimen showing the extract of certain entries in the Balance Sheet is given below.

Extracts from Balance Sheet of …………… Ltd. as on ………..

Liabilities	Rs.	Rs.	Assets	Rs.	Rs.
Share Capital:			Current Assets:
Authorised			Cash at Bank		xxx
…Shares of Rs……………. each Issued			Miscellaneous expenditure:
…Shares of Rs………….. each Subscribed: …Shares of Rs………….. each		xxx	Discount on issue of shares		xxx
		xxx
Called-up …Shares of Rs………….. each		xxx
Paid up:
Called up
…Shares of Rs………….. each	xxx
Less: Calls-in-Arrears	xxx xxx
Add: Forfeited shares	xxx	xxx
Reserves and Surplus :
Securities Premium		xxx
Capital Reserve		xxx
		xxx			xxx