Definition of Capital

In economics, capital, capital goods, or real capital are factors of production used to create goods or services that are not themselves significantly consumed (though they may depreciate) in the production process. Capital goods may be acquired

with money or financial capital. In finance and accounting, capital generally refers to saved-up financial wealth, especially which used to start or maintain a business. A financial concept of capital is adopted by most entities in preparing their financial reports. Under a financial concept of capital, such as invested money or invested purchasing power, capital is synonymous with the net assets or equity of the entity. Under a physical concept of capital, such as operating capability, capital is regarded as the productive capacity of the entity based on, for example, units of output per day.

Types of Capital
1. Financial capital This represents obligations, and is liquidated as money for trade, and owned by legal entities. It is in the form of capital assets, traded in financial markets. Its market value is not based on the historical accumulation of money invested but on the perception by the market of its expected revenues and of the risk entailed.

2. Natural capital This is inherent in ecologies and protected by communities to support life, e.g., a river that provides farms with water. 3. Infrastructural capital It is non-natural support systems (e.g. clothing, shelter, roads, and personal computers) that minimize need for new social trust, instruction, and natural resources. (Almost all of this is manufactured, leading to the older term manufactured capital and its value would be described with its appreciation/depreciation process, rather than its original value: Most of natural capital grows back; infrastructural capital must be built and installed.

partners. research centre. Therefore a capital of company is called Share Capital´ Classification of Share Capital: 1. Organizational capital: Collection of potential rewards such as patents. say Rs. As no one can contribute the whole amount required. Subscribed Capital 4.4. Reserved Capital 8. the company divides it into the parts of a very nominal amount. Human capital: The sum total of the useful knowledge of your employees and your customers with more emphasis on knowledge and competences residing with the company's employees. Un-called up Capital 6. and trademark instruments are part of this type capital. Paid-up Capital 7. Fixed Capital 9. etc. Issued Capital 3. 5.. Called up Capital 5. clients. Share capital A huge amount of capital is required to start the business. Circulating Capital .100 these are known as ³Shares´.10 or Rs. copyright. Authorized capital 2. To raise the required amount of capital the company issues the shares to the general public. such as suppliers. Intellectual capital Relational capital: All relations a company entertains with external subjects.

b) The application sent by the public are more that the issued share capital by company. Issued Capital The Nominal Value of that part of the Authorized capital which has been offered for subscription to the public is called the issued capital. There is no limitation on the Amount of the Authorized Share capital. It is that part of the authorized capital of the company which is issued for the cash or for consideration other than cash.1. Authorized capital Authorized Share capital is the amount of share capital with which a company is registered. which is called over subscription. Three Condition: a) The public may send the application for the same number of shares as issued by the company. It is disclose under the capital clause in the memorandum of association of the company. Subscribed Capital It is that part of the Authorized shared capital which is allotted for the cash or for consideration other than cash. 2. . It is the Maximum Amount of the Share Capital Which can be ever issued by the company. It is also know as Registered Capital and Nominal Capital. It is issued in parts at different times of incorporation of the company. 3. c) The number of application received from public may be less that the issued by the company which is called under subscription.

7.on every equity share of Rs10/. it cannot be converted into equity share capital. Once the reserve capital is created. Paid-up Capital The Amount that has actually been paid up by the shareholders is called Paid up Share Capital. Eg:If a company has so far called up RS: 5/. Un-called up Capital The amount which has not been Called for an each Share or the amount Outstanding on each Share is called the ³uncalled Capital´.4. The remaining part of the value of the share capital is called uncalled capital. The amount of the share is called in the installment at different times as per the need of the company. Reserved Capital A company limited by Share may. . 5. create reserve capital out of its uncalled capital that shall not be called from the shareholder except in the event of winding up of the company. without the permission of the Court. Called up Capital The called up capital is that part of the share capital which has been called up by the company. by passing a special resolution.the balance of Rs 5/-outstanding on each share is called the Un-called Capital 6.

9. Fixed Capital Fixed Capital is the capital that company retains in the shape of fixed assets. Upon which the subscribed capital had been expanded and such assets being utilized by the company to produce income or gain profits. balance. cash. investments. bill receivable. plant and machinery. etc. Which are intended to return to the company with an increment and to be used again . such as land and building. bank. Circulating Capital It is a portion if the subscribed capital of the company intended to be used by being temporarily parted with. goodwill.8. and circulated in business in the form of using goods or other assets such as book debts. etc. furniture.

it may sub-divide it into shares of Rs. a company may issue the unissued shares within its authorized capital at any time it needs. It may also sub-divide the whole or any part of share capital into the shares of smaller denominations. it may consolidate them into the share of Rs. divided in the share of Rs. 1956. After a certain period it may need to alter it. 2. increase its amount also by specific legal procedure. Increase in Authorized Share Capital: A company incorporated with certain amount of authorized share capital can. Consolidation of sub-division of share capital: A company may consolidate the whole amount or any part of its existing share capital into the share of large denominations. .10 each. The Board of directors may issue the unissued part of their authorized share capital only by passing a resolution at their meeting.Alteration in share capital: A public company starts its business with a certain amount of share capital. This increase may be of two types: Further Issue of the Unissued Share: According to section 81 of the Indian companies act. In this case. For example. if a company is having share capital.100 each.100 each. For example. the number of shares will be 10 times of the existing number. if a company is having share capital divided into shares of Rs. According to section 94(1) a company with a limited liability and having a share capital can alter its capital in any ways of the following: 1. if they are authorized to do so by their articles of association. According to section 94 of the limited by guarantee with a share capital. if it requires. For this a company will not have to make any alteration in its memorandum of association or articles of association. The number of shares will be reduced to 1/10th of existing number of shares in this case. are empowered to make concerned company permit to do so.10 each. Increase in Share Capital: A company may increase its share capital by issuing new shares. to reduce or increase or reorganize it.

To cancel the Unissued Shares: A company can cancel all the shares which have not been subscribed for by any one and the company has not received the acceptance of any one for them. The permission of court or central government is not required for a company to make the alteration in its share capital. The registrar will make the necessary changes in the memorandum of association or articles of association of the company on the basis of this information. 2. For making such alteration. This can be done by the company by passing a special resolution in its general meeting. the company is to follow the following legal procedure: 1. To Pass a Resolution: According to Section 94(2) a company should pass an ordinary resolution for making an alteration in its share capital. Such cancellation of unissued shares is not treated under companies Act. it may very well do so making the alteration in its articles of association. .3. To Be Authorized By Articles of Association: A company must be authorized to do so in its articles of association. To Inform the Registrar: According to Section 95(1) and Section 95(2) the company is under obligation to inform the Registrar of Companies about the alteration in its share capital within 30 days of such changes. Conversion of shares and stock: A company may convert its fully paid up shares into stock or stock into shares. Legal Procedure for Alteration in Share Capital: According to Section 94 a public company. Even if a company is not empowered to do so by its articles of association. 3. first. limited by shares and a public company limited by guarantee. This can be done only in respect of the fully paid up shares. having share capital may alter their share capital. 4. The object of such cancellation may be to get rid of unissued shares.

4. which proposes to convert any loan or debentures into the shares of company. Exemption from Passing a Resolution: According to Section 94(1) and 94A (2) of the Companies Act. 1974 there is no need of passing a resolution fro alteration of authorized share capital if it is increased by the reason of: a) An order made by the central government for conversion of any loan or debentures into the shares of company. 5. if the required information is not sent to the registrar along with a copy of resolution. in default may be penalized with a penalty up to Rs. Keira Knightley . the company and every officer of the company. b) An order made by the central government on application of any public financial institute. Provision of Penalty: According to Section 95(3).500 per day for the period of mistake.

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