Share Capital and Allotment
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Share Capital and Allotment

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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@WellPositionedLaplace

Questions and Answers

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?

<p>Preference shares have priority over equity shares in terms of dividend payment</p> Signup and view all the answers

What is the time frame within which a share certificate must be issued?

<p>Within 2 months of allotment of shares</p> Signup and view all the answers

What is disproportionate allotment?

<p>Allocation of shares in excess of the application money received</p> Signup and view all the answers

What is the main difference between a public issue and a private placement?

<p>A public issue is issued to the general public, while a private placement is issued to a select group of investors</p> Signup and view all the answers

What is the purpose of a return of allotment?

<p>To file a statement with the Registrar of Companies (ROC) containing details of allottees and shares allotted</p> Signup and view all the answers

What is the main purpose of sweat equity shares?

<p>To issue shares to employees of the company as a form of compensation</p> Signup and view all the answers

What is the relationship between issued capital and subscribed capital?

<p>Issued capital is equal to subscribed capital</p> Signup and view all the answers

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.

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