Detailed breakdown this article will deal with types of companies in india and its breakdown. A company usually raises its capital in the form of shares called share capital and debentures debt capital. Share capital may also denote the number and types of shares that compose a corporations share structure. This chapter deals with the accounting for share capital of companies.
Company meetings essentials kinds of company meetings. Depending on the capital of the business, objectives of the parties involved and the type of business, the most common forms of commercial companies used in oman are. The law defines preference share capital as that part of the share capital of a company which fulfills both the following conditions namely. A share is a share in the share capital of acompany, and includes stock receipt where there is adistinction between stock and shares is expresed orimplied. Paid up capital is the part of the calledup capital which is paid by the shareholders. Every share in a company having a share capital shall be distinguished by its distinctive number.
Power of company limited by shares to alter its share capital. The certificate of incorporation of a company is issued by registrar of. This is in accordance with section 284 of the companies act, 20. Kinds of share capital companies act, 20 bare acts law. A company has to fulfil requirements in terms of documents moa, aoa, shareholders, directors, and share capital to be deemed as a legal association. A company has certain very unique features and characteristics. Section 43 of the act provides that the share capital of a company limited by shares shall be of two kinds. Meaning of share capital a joint stock company should have capital in order to finance its activities. The balance of nominal capital remaining to be issued is. The common stock contributed is denoted in money and is the capital of the company. Judicial acceptance of the company as a separate legal entity. A company may have many different types of shares that come with different conditions and rights in relation to profit entitlement, entitlement to capital if the business is wound up and voting rights within the business share types.
What is share capital and explain different kinds of share. The companies act, 1956 search engine for indian law. With reference to any company limited by shares, equity share capital means share capital which is not a preference share capital. Besides its meaning in accounting, described above, share capital may also describe the number. It is the maximum amount of share capital that a company can issue. According to companies act, 20 no change in the concept of types of share capital as in 1956 act. In a strict accounting sense, share capital is the nominal value of issued shares that is, the sum of their par values, sometimes indicated on share certificates. Accounting for share capit al share and share capital. The share capital of a company limited byshares shall be of two kinds only, namely. The paper will then proceed to discuss the different types of shares, as they existed before enactment of the companies act, 1956 hereinafter the act unless. Private company the term private company has been defined under section 268 of companies act 20.
Share is defined in section 246 of the companies act, 1956 as, share means share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied. It is divided into a number of indivisible units of a fixed amount. One man company where one man holds practically the whole of the share capital of a company and takes a few more dummy members simply to meet the statutory requirements of the minimum number of persons such a company is one man company. Find out about the types of stock shares offered by plcs in the united kingdom. Concept of corporate veil, applicability of companies act. This article is written by sneha chawla, while pursuing nujs diploma in entrepreneurship administration and business laws. Notice to registrar of consolidation of share capital, conversion of shares into stock, etc. Nature and types a company is an artificial person created by law, having separate entity with a perpetual succession and a common seal. Shares company law concept, meaning, nature and types. There are two general types of share capital, which are common stock and preferred stock. Subsection 84 of section 2 of the companies act 20, defines shares as, share means a share in the share capital of a company including stocks. Share capital refers to the funds that a company raises in exchange for issuing an ownership interest in the company in the form of shares.
A private company means a company, which has a minimum paid up share capital of rs. Meaning and types of share capital and shares, issue of share capital, reduction of share capital i. It constitutes the basis of the capital structure of a company. A share under the companies act, can either of rs10 or rs100 or any other value which may be. We have also given the answers for the multiple choice questions mcq on companies act 1956. Part 1 share capital equity, preference shares issued. A share contains bundles of rights and obligations contained in the articles of association.
You may define shares as a smaller part of capital that is known as share and a person, who owes shares is known as the shareholder. Jun 28, 2018 in this video we discuss type of shares that is equity and preference shares and also we study type of preference share capital and equity share capital an. Features of a company, kinds of company and share capital. Section 43 of companies act, 20 kinds of share capital. The share capital of companies limited by share shall be of two kinds. According to section 55 of the act, a company limited by shares cannot issue any preference shares which are irredeemable. But for trading companies capital is essential at every stage. The memorandum also states the number of shares to be issued. Authorized, registered, maximum or normal capital the maximum amount of capital, which a company is authorized to raise from the public by the issue of shares, is known as authorized capital. The memorandum of association of every company has to specify the amount of capital with which it.
The characteristics of common stock are defined by the state within which a company incorporates. Capital of a c ompany shareholders rights types of shares capital refers to the amount invested in the company so that it can carry on its activities. Share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock. The share capital of a company limited by shares shall be of two kinds only, namely a equity share capital. Provided that nothing contained in this act shall affect the.
Kinds of share capital relevant provisions taxguru. Equity share capital section 43 of the act provides that the share capital of a company limited by shares shall be of two kinds. Dec 08, 2017 the two types of share capital are common stock and preferred stock. Features of company as per indian companies act 1956, define a company or corporate body. Each share is assigned a nominal value the amount that must be paid to the company for the share. Apr 21, 2016 there are different types of shares, and you must be well familiar with all of them. Power to return accumulated profits in reduction of paidup share capital. As per section 43 of the companies act, 20 permits a company limited by shares to issue 2 classes of share i. Define shares explain the different types of shares in detail.
Kinds of companies under companies act, 20 bbamantra. The different classes of share capital and the rights attached to. Notice to registrar of consolidation of share capital, conversion of shares into stock. The share capital of a company limited by shares shall be of two. Types of share capital share capital of a company can be divided into the following different categories. According to section 2 46 of the companies act, 1956, a share is a share in the share capital of a company, and includes stock except where a distinction stock and shares is expressed or implied. Share capital means the money paid into the company or legally promised as being available on call by members for shares in the company. The other type of share capital is the preference share capital. A company is an incorporated association of persons created by law to carry on the expressly laid down objectives.
Increase and reduction in this share capital is possible according to regulation given under company ordinance. The articles of association also mention the types of shares, which could be transacted by the company. It is the maximum amount of share capital stated in a companys memorandum which the company is, for the time being, authorized to raise. Paidup share capital the actual amount of money a company receives from investors from those that have subscribed for shares. Icsi house, 22, institutional area, lodi road, new delhi 110 003. Transfer of shares in the case of public company is a prohibited b restricted c freely transferable d none of these 34. Let us look at the various types of shares a company can issue equity share and preferential share. The two kinds of share capital sec 43 equity share capital all share capital that is not a preference share.
A plc is allowed to issue many different kinds of stock shares. Share capital, its kinds under company law the law study. Let rocket lawyer walk you through the most common types of shares a company may issue. Equity shareholders share profits or losses incurred by the company. In this article you can find multiple choice questions on companies act with answers.
Power of company to arrange for different amounts being paid on shares. In other words, the capital collected by a joint stock company for its business operation is known as share capital. We have discussed earlier post the company under the companies bill 2012 which is still relevant when the bill become act. Share capital is considered as the total amount of money a company owns plus the total valuation of its assets in terms of money. Ordinary shares are the most common type of shares and are standard shares with no special rights or restrictions. Company law solutions provides an expert service for all aspects of share capital for private companies, including issuing and transferring shares, setting up different classes of shares, converting shares from one class to another, consolidating and subdividing shares, companies buying their own shares and reductions of capital. Capital of a company shareholders rights types of shares. Share capital and debentures cover institute of company.
Kinds of share capital effective from 1st april, 2014 the share capital of a company limited by shares shall be of two kinds, namely. Ordinary shares constitute the biggest amount of shares, but special types of shares like the alphabet shares also exist. A share or the proportion of interest of a shareholder is equal to the proportion of the amount paid to the total capital payable to the company. Define shares explain the different types of shares in. Meaning and types of share capital accountingmanagement. Provided that nothing in this section shall apply to a share held by a person whose name is entered as holder of beneficial interest in such share in the records of a depository. Equal share of capital and profits and losses section 241. Xyz co, is having 10% share capital held by another public company and 35% held by.
The purpose of this capital is to protect the interest of the creditors in the event of winding up of the company. Equity shareholders are considered the real owners of the company. Jul 23, 2012 according to section 86 of the companiesact, 1956 was amended with effect from 122000 new issues of share capital to be only of twokinds. In other words, a share is a measure of the interest in the company s assets held by a shareholder.
Shares section 246 of the companies act of 1956 defines a share as a share in the share capital of a company and includes stock except where a distinction between stock and share is expressed or implied according to this definition a share is a fractional part or unit of the capital of a company. In the event that the company requires more finance, section 121 of the companies act 1985 gives the company the power to increase its share capital by new shares of such amount as it thinks expedient. Public company and public sector company both the companies are same. Sep 24, 20 we have discussed earlier post the company under the companies bill 2012 which is still relevant when the bill become act. There are different types of shares, and you must be well familiar with all of them. In other words, the amount of money collected by the company from its consumers to contribute to its capital is collectively known as share capital and individually known as shares. Meaning of shares, equity share, preferential share. A share in the share capital of the company, including stock, is the definition of the term share. Types of shares liquidation of the company is called re capital reserve. The registrar, on the production to him, of an order of the court confirming the reduction of the share capital of the company and on delivering to him the certified copy of the order and of minutes approved by the court showing with respect to the share capital of the company as altered by the order register the reduction of share capital. Capital reserves are pa reserves which are not available for dec a company has decided to call only in case of. Shares are considered as goods under s 27 of the sale of goods act, 1930, and are moveable property, but are. According to section 43 of the companies act, 20, the share capital of a company is of two types.
Company law share and discover knowledge on linkedin. The amount of share capital or equity financing a company. Kinds of share capital the share capital of a company limited by shares shall be of two kinds, namely. Let us familiarize ourselves with the features of a company, kinds of company, and share capital of company. Here the share capital is increased to the par value of. The current rules relating to share capital require companies having a share capital to have a par value or a nominal value ascribed to their shares. Only companies limited by shares have share capital. New issues of share capital to be only of two kinds. Shares and typeskinds of shares in company law in india. Share capital classification and kinds methods of raising. Justice lindley, a company is meant an association of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business, and who share the profit and loss as the case may be arising there from. A company comes into existence when it is registered under the companies act or other equivalent act under the law. When discussing the amount of money a company can legally raise through the sale of stock, there are several categories of share capital.
The share capital of a company limited by shares shall be of two kinds only, namely. When total capital of a company is divided into shares, then it is called share capital. Share capital is the backbone of the company without it the company cannot achieve its goals. The share capital of a company limited by shares shall be of two kinds. We may also define shares as one of the units in the company into which the total. Paidup share capitalpaid up share capital is the amount of money credited as paid up in respect of shares issued. This is the amount of capital stated in the capital clause of memorandum of association. The usual different expressions of share capital found in the capital structure of a company are popularly known as kinds of share capital. A one man company can be incorporated under sec 262 of the companies act, 20. There are two types of shares under indian company law. As per section 43 a equity share capital may be divided on the basis of voting rights and differential rightsdvr as to dividend, voting rights or otherwise according to the rules.
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