Share capital

Share capital (UK English) or capital stock (US English) refers to the portion of a company's equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value. For example, a company can issue shares in exchange for computer servers, instead of purchasing the servers with cash.

The term has several meanings. In its narrow, classical sense, still commonly used in accounting, share capital comprises the nominal values of all shares issued, less those repurchased by the company. In a wider sense, if the shares have no par value or the allocation price of shares is greater than their par value, the shares are said to be at a premium (called share premium, additional paid-in capital or paid-in capital in excess of par); in that case, the share capital can be said to be the sum of the aforementioned "nominal" share capital and the premium. In the modern law of shares, the "par value" concept has diminished in importance, and share capital can simply be defined as the sum of capital (cash or other assets) the company has received from investors for its shares.

Another use of "share capital" is to denote the number and types of shares in a company's capital. For an example of the different meanings: a company may be said to have an "outstanding share capital" of 500,000 shares; it has received for them a total of 2 million dollars, which in the balance sheet is the "share capital".

Types of share capital

• Authorised share capital is also referred to, at times, as registered capital. It is the total of the share capital which a limited company is allowed (authorized) to issue. It presents the upper boundary for the actually issued share capital.
• Issued share capital is the total of the share capital issued (allocated) to shareholders. This may be less or equal to the authorized capital.
  • Shares outstanding are those issued shares which are not treasury shares. These are all the shares held by the investors in the company.
  • Treasury shares are those issued shares which are held by the issuing company itself, the usual result of a buyback.

Issued capital can be subdivided in another way, examining whether it has been paid for by investors:

• Subscribed capital is the portion of the issued capital, which has been subscribed by all the investors including the public. This may be less than the issued share capital as there may be capital for which no applications have been received yet ("unsubscribed capital").
• Called up share capital is the total amount of issued capital for which the shareholders are required to pay. This may be less than the subscribed capital as the company may ask shareholders to pay by installments.
• Paid up share capital is the amount of share capital paid by the shareholders. This may be less than the called up capital as payments may be in installments ("calls-in-arrears").

See also

• Share
• Corporation
• Balance sheet
• Paid in capital
• Share premium account
• Shareholders' equity

External links

• Detailed breakdown from Companies House