10 Questions
What is the main purpose of authorized capital?
To determine the maximum amount of share capital that a company can issue
What is the purpose of a rights issue?
To issue shares to existing shareholders at a discounted price
What is the purpose of a share certificate?
To provide evidence of ownership of shares
What is the main difference between equity shares and preference shares?
Preference shares have priority over equity shares in terms of dividend payment
What is the time frame within which a share certificate must be issued?
Within 2 months of allotment of shares
What is disproportionate allotment?
Allocation of shares in excess of the application money received
What is the main difference between a public issue and a private placement?
A public issue is issued to the general public, while a private placement is issued to a select group of investors
What is the purpose of a return of allotment?
To file a statement with the Registrar of Companies (ROC) containing details of allottees and shares allotted
What is the main purpose of sweat equity shares?
To issue shares to employees of the company as a form of compensation
What is the relationship between issued capital and subscribed capital?
Issued capital is equal to subscribed capital
Study Notes
Share Capital
- The total amount of money that a company can raise from its shareholders
- Divided into shares of fixed amount (e.g., ₹10, ₹100)
- Authorized capital: maximum amount of share capital that a company can issue
- Issued capital: amount of share capital that has been issued to shareholders
- Subscribed capital: amount of share capital for which shareholders have paid
- Paid-up capital: amount of share capital that has been paid by shareholders
Types of Shares
-
Equity Shares:
- Represent ownership in the company
- Holders have voting rights
- Entitled to receive dividends
-
Preference Shares:
- Have priority over equity shares in terms of dividend payment and repayment of capital
- Holders do not have voting rights
- Dividend rate is fixed
-
Debentures:
- Represent debt obligation of the company
- Holders have no voting rights
- Receive fixed rate of interest
Issue of Shares
- Private Placement: issue of shares to a select group of investors
- Public Issue: issue of shares to the general public through an initial public offering (IPO)
- Rights Issue: issue of shares to existing shareholders at a discounted price
- Bonus Issue: issue of shares free of cost to existing shareholders
- Sweat Equity Shares: issue of shares to employees of the company as a form of compensation
Share Certificates
- Document issued by the company to shareholders as evidence of their ownership
- Contains details such as:
- Shareholder's name and address
- Number and type of shares held
- Date of issue and distinctive number of the certificate
- Share certificates are issued within 2 months of allotment of shares
Allotment of Shares
- Process of allocating shares to applicants who have applied for them
- Types of allotment:
- Pro-rata Allotment: allocation of shares in proportion to the application money received
- Disproportionate Allotment: allocation of shares in excess of the application money received
- Return of Allotment: statement filed with the Registrar of Companies (ROC) within 30 days of allotment, containing details of allottees and shares allotted.
Test your knowledge of share capital, types of shares, issue of shares, share certificates and allotment of shares in a company.
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