Explain Features And Different Types Of Share Capital

Owning and running a successful business is not enough. The raging profits are commendable to earn. But it's highly wise how you invest that money lucratively. Banks? Yes, but limited the risk, limited the profit.

As a businessman or an investor, you have the drive to face the risk in return for high returns. To know what that is, we’ll discuss the share capital and types of shares. So, that you’re well-versed with all the terms and invest your funds wisely! 

Meaning of Share Capital

Before we dig into the kinds of share capital and its features, it’s significant to start from the crux. Share capital denotes the amount of total money that is raised by the organization from public and private Limited company Registration sources via the issue of shares. 

As we know, the company is an artificial entity as well as can not produce money on its own, it sells the company’s shares to distinct shareholders. The investors or the shareholders receive shares of the organization in return for the money invested in the firm. 

There is a distinction between the division of units of the company’s capital. The fixed amount is known as shares. And, the money generated by the organization after selling the shares is known as Share Capital. 

Later below, we will explain various types of share capital. But first, you must be enlightened with the salient features of share capital.

Key Features of Share Capital

Now that you know the essence of the terms shares and share capital. Mentioned below are the indispensable aspects of share capital you must know!

• Permanent Nature- The most crucial feature of share capital is that equity share capital is
• perpetual and non-redeemable. Once you have bought the shares, there is no going back! It’s only possible until and unless the business decides to wind up the corporation.
• Extremely Lucrative Potential- It is a no-brainer that equity shares are risk-worthy investments and they are elusive! Despite its volatile nature, the result might be very profitable depending upon how much profit is earned. Only if you have an enormous risk appetite, then don’t wait and just grab the shot. The wealth generated by the returns of diverse kinds of share capital is worthwhile. 
• Stock Split- Heading to the next feature is the stock split. This signifies bifurcating the equity shares into tiny components and diminishing their price. This turns out to be fruitful for the investor of the company. The decline in the price of shares raises the liquidity of shares. On the other hand, The large volume leads to an increase in the value when the organization is doing great business.
• Dividend Expend and Easy Deliverable- Last but not least, the equity shares are highly transferable. It implies the ownership of different types of share capital can be simply transferred to some other investor. Subsequently, the equity shareholders get a dividend for the same. The total amount of the dividend varies upon the profit earned by the organization in that specific year as well as the availability of funds. Hence, whenever a company suffers losses, the dividend isn’t paid for that year. 

Types of Share Capital 

Now you must be well-versed with key features of share capital, let’s head to types of shares. Go through these different types of share capital given below- 

• Authorized Capital: Authorized Capital signifies the maximum amount of share capital an organization can issue. Its amount is designated in the Memorandum of Association. It can be altered only by choosing a particular procedure.
• Issued Capital: Issued Capital is the kind of share capital issued to the shareholders or investors. It can be lower than authorized capital but not greater than it. 
• Subscribed Capital: Subscribed Capital is the total amount of capital that is invested by the public. 
• Called Up Capital: Called Up Capital is the type of subscribed share capital. It is called upon to remunerate the shares given to the shareholders. The organization may not need the entire capital at once, therefore it may ask the investors or shareholders to pay for only the portion called up. 
• Paid-Up Capital: Paid-Up Capital is the complete amount of capital that the shareholders pay. 
• Uncalled Capital: Uncalled Capital is the type of shares that have not been called upon to remunerate 
• Reserve Capital: Reserve Capital is the type of uncalled share capital. It is reserved by the company until its liquidation. This type of share is not called upon in the period of the company's existence. It is kept aside in favor of the creditors of the company. 

Final thoughts

Here in this blog, we have covered all the relevant points of different types of share capital as well as their features. Now that you’re informed of share capital- its meaning, types, and features go through our other insightful blogs. For more details, contact us at J.R Compliance. We will be appeased to quench your knowledge!