Question

Explain the classification of share capital.

Answer 1

1. Authorised/Nominal/Registered Capital: This is the maximum amount of capital a company is allowed to raise through public investment, as stated in its memorandum of association. It is also known as registered or nominal capital and acts as a ceiling for how much capital the company can issue.
2. Issued and Unissued Capital: Issued capital is the portion of authorised capital that the company has actually offered to the public for investment. Any remaining authorised capital not yet offered is termed unissued capital.
3. Subscribed and Unsubscribed Capital: Subscribed capital refers to the amount of issued capital that investors (the public) agree to buy, typically during an initial public offering (IPO). Any part of the issued capital not purchased by the public is called unsubscribed capital.
4. Called-up, Uncalled, and Reserve Capital:
   • Called-up capital is the portion of subscribed capital that the company has asked shareholders to pay.
   • Uncalled capital is the remainder that the company has not yet asked for.
   • Reserve capital is a segment of uncalled capital that can only be demanded during company liquidation to meet financial needs.
5. Paid-up Capital and Calls in Arrears: Paid-up capital is the amount of called-up capital that shareholders have actually paid. Calls in arrears, also known as unpaid calls, refer to any portion of the called-up capital that shareholders have not yet paid.