Chapter 5 "Share Capital"

Question 1

What is share capital?

Answer 1

Share capital means total amount invested by owners in the company.

Question 2

Write types of share capital?

Answer 2

1) AUTHORISED SHARE CAPITAL:
This is the maximum amount of share capital which can be issued to people.

2) ISSUED/ALLOTED SHARE CAPITAL:
Issued share capital is the part of share capital which has been issued to shareholders.

3) PAID-UP SHARE CAPITAL:
It is the part of share capital which has been paid by public.

Question 3

What is share, Describe its characteristics?

Answer 3

Total Share capital of the company is divided into smaller parts, which are called shares.

CHARACTERISTICS/ NATURE OF SHARES:
1) Movable Property, carrying rights and obligations.
2) Transferable.
3) Must be fully paid.
4) Every share has a distinctive number.
5) Main evidence of title/ Ownership is Share Certificate issued in:
> Physical form under signature of authorised officer of company.
> Book entry form (electronic)

Question 4

Discuss the kind of shares?

Answer 4

Authorized share capital may subdivided in two forms.
a) ORDINARY/EQUITY SHARES:
> Have Voting rights.
> Receive dividend after preference dividend.
> Receive repayment on winding up after Preference Shares.
> Have different classes on the basis of different voting and other rights.

b) PREFERENCE SHARES:
> Do not have rights to attend and vote on GM.
> Preference right to receive dividend.
> Preference right to receive repayment on winding up.
> May have different classes on the basis of accumulation of dividend, redemption or conversion of shares.

Question 5

Discuss the classes of shares?

Answer 5

in each kind of shares,(e.g ordinary shares & preference shares) company may have different classes of shares e Class A, Class B.
Nominal amount and rights of all shares within a class must be same. However rights of a class may be different from other classes.
Rights attached to each class are mentioned in articles.

Question 6

What are the rights of share holders?

Answer 6

Different classes of shares may have different rights. Usually rights of shareholders include:
1) Right to receive dividend.
2) Right to receive notice, and attend general meeting.
3) Entitlement to Right issue and bonus issue.
4) Voting rights.
These rights may be varied subsequently.

Question 7

What are the liabilities of shareholders?

Answer 7

Liability of shareholders is limited upto the unpaid amount at time of winding up i.e:
> If shares are fully paid shareholders will have no further liability.
> If shares are partly paid shareholders will be liable to pay the unpaid amount.

Question 8

Describe the procedure to alter the authorized capital?

Answer 8

1) A company limited by share can alter its share capital if authorized by its articles.
2) A special resolution is passed by company in general meeting.
3) Company shall file resolution and altered copy of memorandum to Registrar within 15 days of passing the special resolution.