Types of share capital: Overview with examples
Types of Share Capital Overview
Share capital is the sum of all funds that companies raise by issuing shares to investors. Following is the list of types of share capital that we will discuss in this post.
1) Authorized capital
2) Issued capital
3) Subscribed capital
4) Called-up capital
5) Paid-up capital
1) Authorized Capital
It is the maximum amount of share capital that a company is authorized to issue. Companies can issue the full amount of their authorized share capital but usually, they do not. Instead, some of it is held in reserve by the company for possible future use.
The authorization of share capital does not require a formal accounting entry in books of accounts. It is because the event has no immediate effect on either company assets or stockholders’ equity. However, the number of authorized shares is mostly reported in the stockholders’ equity section. It is also called nominal or registered capital.
2) Issued Capital
It is the part of authorized share capital that is issued to the public for subscription. A company can either issue the whole authorized share capital or a portion with the plan of issuing more shares at a later date. So, the amount of authorized share capital that is still in hands is known as the unissued share capital.
3) Subscribed capital
The part of issued share capital that is actually subscribed or taken over by the investors is known as subscribed capital. This does not necessarily mean that all the shares issued will be subscribed by the investors. The portion that is not taken over by the investors is called un-subscribed capital.
4) Called-up capital
The amount of share capital that investors have subscribed, but have not paid the price, is referred to as called-up capital. Generally “called up” means that the shares issuing company has requested for a portion or all of the unpaid balance to its investors, however, investors are yet to pay.
5) Paid-up capital
The amount of share capital that is subscribed and in exchange the amount of money that has also been paid by the investors is known as paid-up capital.
More Resources
