Share capital is the money a company raises by issuing shares. It is described in stages. Authorised capital is the most the company may issue. Issued capital is what it has offered. Subscribed capital is what investors took up. Called-up capital is what the company has asked them to pay. Paid-up capital is what they have actually paid. By type, share capital splits into equity share capital and preference share capital.
Share capital is the owners' money in a company, as opposed to money it has borrowed. When a company is formed, its founders decide how many shares it can issue and at what face value. As it sells those shares, the proceeds become share capital on the balance sheet. The figure matters for two reasons. It caps how much the company can raise without changing its charter. And it is the base for equity ratios.
Authorised capital
Authorised capital is the ceiling. It is also called nominal or registered capital. It is the most the company may issue under its memorandum of association. A company might have authorised capital of Rs 100 crore. That means it can issue up to 10 crore shares of Rs 10 face value. Raising the limit needs a shareholder resolution, a filing with the Registrar of Companies and a fee. Authorised capital is permission, not money. A company can have Rs 100 crore authorised and only Rs 5 crore actually raised.
Issued capital
Issued capital is the part of authorised capital the company has actually offered to investors. Say the company above has issued 6 crore shares. Its issued capital is Rs 60 crore at face value. The unissued Rs 40 crore stays available for a future rights issue, a bonus issue, employee stock options or a fresh public offer.
Subscribed capital
Subscribed capital is the part of issued capital that investors agreed to buy. In a public offer that is oversubscribed, subscribed capital equals issued capital. In an undersubscribed offer, it is lower. For listed companies the two figures are almost always the same.
Called-up and paid-up capital
A company does not always demand the full face value at once. Called-up capital is what it has asked shareholders to pay so far. Paid-up capital is what they have actually paid. If some shareholders have not paid a call, the gap is called calls in arrears. In practice, shares in India are almost always fully paid at issue. So called-up and paid-up capital match. Paid-up capital is the figure shown on the balance sheet as share capital. The Companies Act also uses it for several thresholds.
Equity and preference share capital
The same capital can be cut a different way. There are two kinds of shares. Equity shares vote, receive whatever dividend the board declares, and own the residual value of the company. Preference shares carry a fixed dividend and priority on winding up, but usually no vote. The varieties are set out in types of preference shares. For most listed Indian companies, preference capital is zero or small. Share capital on the balance sheet is almost all equity.
Share capital and market value
Share capital is recorded at face value, usually Rs 1, Rs 2, Rs 5 or Rs 10 a share. It has nothing to do with the market price. Take a company with paid-up capital of Rs 60 crore in Rs 10 shares. It has 6 crore shares. If those trade at Rs 1,500, the market capitalisation is Rs 9,000 crore, 150 times the share capital. The gap is made up of two things. Reserves built from past profits, and the premium investors paid above face value, which sits in a separate securities premium account. A bonus issue moves money from reserves into share capital without raising any cash. A stock split lowers the face value and raises the share count, and share capital stays the same. Both are explained in stock split and dividend meaning.
FAQs
What is the minimum share capital for a company in India?
There is no minimum paid-up capital for a private or public company since the Companies (Amendment) Act 2015. Authorised capital must still be stated.
Can share capital be reduced?
Yes. Either through a capital reduction approved by the National Company Law Tribunal, or through a buyback within the limits the Companies Act allows.
Where is share capital shown in the accounts?
On the balance sheet under equity, as a separate line from reserves and surplus. A note gives the authorised, issued, subscribed and paid-up figures.
Why does face value matter?
Dividends are often declared as a percentage of face value, and share capital is worked out on it. A 200% dividend on a Rs 10 share is Rs 20 a share.