What is Share capital?
The word "capital" means the specific amount of money with which the business of a company is commenced. "Share capital" which means the amount collected upon shares issued.
Every limited company must be registered with the share capital. Search company must also state the share capital in its memorandum of association. There is no statutory limit on share capital.
According to Section 4(1)(e) of the Companies Act 2013 -
In the case of a company having share capital -
(i) The amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscriber to the memorandum agree to subscribe which shall not be less than one share and,
(ii) The number of shares each subscriber to the memorandum intends to take, indicated opposite his name.
A private limited company cannot exceed the powers conferred on it under the memorandum of association of the company.
Kinds of share capital (Section 43 of the Companies Act) -
According to section 43 of the Companies Act 2013, the share capital of a company limited by shares shall be of two kinds namely -
(a) Equity share capital -
(b) Preference share capital -
a) Equity Share Capital -
according to section 43 of the said Act, equity share capital may be -
- with voting rights; or
- with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed.
"Preference share capital", with reference to any company limited by shares, means all share capital which is not preference share capital.
b) Preference Share Capital -
Preference share capital with reference to any company limited by shares means that part of the issued share capital of the company which carries or would carry a preferential right with respect to -
(a) payment of dividend either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to Income Tax; and
(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid up or deemed to have been paid up, whether or not, there is preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.
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