Understanding Share Capital Meaning and Its Various Types
Understanding Share Capital Meaning and Importance
Share Capital refers to the portion of a company’s capital that is raised by issuing shares to the public or private investors. It represents the ownership of shareholders in the company and is the primary source of long-term funds for a company.
According to Section 2(71) of the Companies Act, 2013, “Share Capital means the capital of a company which is divided into shares of a fixed amount each.”
Key Points of Share Capital
- Shareholders are
Rights Issue, Bonus Shares & Debentures: SEBI Rules and Accounting
Rights Issue
A rights issue allows a company to raise capital by offering existing shareholders the opportunity to purchase additional shares at a discounted price, proportional to their current holdings. Typically used to fund expansion or debt reduction, shareholders receive rights entitlements which they can exercise by paying for new shares within a limited period, renounce by selling them on the market, or let expire. This maintains proportional ownership and prevents dilution for participating
Read MoreUnderstanding Prospectus Types, Indoor Management, and Promoter Roles
Prospectus: Types and Key Concepts
Matters to be Stated in a Prospectus (Section 26):
A prospectus may be issued by or on behalf of a public company, either concerning its formation or subsequently, or by any person engaged or interested in the formation of a public company.
Types of Prospectus
Shelf Prospectus
- Certain classes of companies, as regulated by the Securities and Exchange Board, may file a shelf prospectus with the Registrar during the initial securities offering. This prospectus indicates
Understanding Business Funding: Types, Sources, and Short-Term Strategies
Funding Issues: Sources and Types
1. Relationship Between Asset Types and Sources of Financing
Assets: Goods and rights of the company. The way assets are distributed determines the economic structure of the company. Assets are divided into two groups:
- Current Assets: Assets and rights that do not remain with the company but circulate and are replaced by others.
- Fixed Assets: Assets that remain fixed in the company for a period of time. Also known as immobilized assets.
Liabilities: Debts and equity.
Read MoreUnderstanding Company Assets and Liabilities
Current Assets
Group the elements that stay with the company a short time (less than 1 year). It is divided into:
- Stocks: Items that are stored pending processing or use in processing or sale. Includes merchandise (items that the company acquires to be sold without transformation), raw materials, fuel, spare parts, office supplies, finished products, and packaging.
The difference between finished products and goods is that the former have been produced or manufactured by the company, while the goods
Read MoreKey Stock Market Terms and Definitions
Bid: The price a buyer is willing to offer for shares in a company.
Blue Chip Stocks: Stocks of leading companies with a reputation for stable growth and earnings. *Generally considered among the best stocks.*
Bond: Certificate issued by companies and governments to their lenders.
Capital: Money and other property of companies used in transacting the business.
Capital Stock: All shares representing ownership of a company.
Commodities: Products such as agricultural products and natural resources (wood,
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