Few Basic Company And Share Related Terms For Better Understanding

Few Basic Company And Share Related Terms For Better Understanding

Importantly, face value of a share has no relationship with the current stock price. This face value is instead used to calculate the accounting value of a companys stock for the balance sheet of the company.

Often when we try to research on a company stock for its likely potential going ahead we may come across terms that we may not be familiar with. So, here are given few company and stock related terms for better understanding:

Few Basic Company And Share Related Terms For Better Understanding

1. Authorised share capital:

The Companies Act, 2013 defines authorized capital also called as nominal capital as the capital that is authorised by the memorandum of a company to be the maximum amount of share capital of the company. In simple words it is the maximum capital amount for which equity shares can be issued by the Company to shareholders or promoters. This capital amount is decided even before the incorporation of the Company.

The authorized capital find's place under the 'Capital clause' head in the Memorandum of Association.

The provisions allow increasing authorized capital at any time in the futures by following the prescribed set of rules.

To understand say an X company has an authorized capital worth Rs. 20 lakhs and has issued shares of Rs. 15 lakhs to shareholders, it simply implies that the X company has not issued shares in excess of the maximum authorized limit or authorize capital. For issuing shares worth in excess of the authorized capital, the company would need to start the process of increasing authorized capital.

2. Issued or subscribed capital:

As per the Companies Act 2013, "issued capital" means such capital as the company issues from time to time for subscription.

3. Paid-up share capital:

It is the capital amount for which shares of the Company were issued to the shareholders and payment in lieu of them has been made by the shareholders. Paid up capital at any given time can be equal to or less than the authorize share capital.

There is no minimum paid-up capital requirement for the Company as laid down in the Companies Amendment Act 2015. So, now a Company can be incorporated with a paid up capital of even Rs. 1000.

For any kind of enhancement or change in the paid-up or authorized share capital, the matter has to be brought to the notice of the Registrar of Companies or ROC.

4. Fully paid shares:

Fully paid shares are those shares for which the buyer has paid the full issue price. Say, for shares issued for Rs. 100/ share, the shareholder has made the payment of Rs. 100 per share. In such a case the shareholder is in no obligation to make further payment in respect of that share.

5. Partly paid shares:

These are shares in a company which are only partly been paid as against the full issue price. So, these shares can be bought by investors by not paying the total issue price and instead the remaining amount against these shares can be paid in installment as and when the company makes a call for them.

6. Face value of a share:

Face value also referred as par value is the value at which the stock is listed on the bourses. This value is not arrived at by any calculation but instead provided subjectively at the time of share issuance. Importantly, face value of a share has no relationship with the current stock price. This face value is instead used to calculate the accounting value of a company's stock for the balance sheet of the company.