Difference between shareholders loan and increase in share capital

Aspect Shareholdes loan / loan capital Share capital
Definition 1.The capital raised by borrowing is
referred as loan capital or loan
2. A company may raise loan
capital only by complying with the
rules and procedures with regard to
borrowing as prescribed in the Act
and the company’s constitutional
The third schedule contains clause
13 which empowers a company to
borrow or raise or secure
1. The amount of share capital is re!uired
to state in the memorandum.
2. "ncrease in the share capital may enable
the company to increase its borrowing
#rocedure 1. A debenture may ta$e one of
three forms%
&a' An ac$nowledgement of a debt
under seal.
&b' An instrument charging the
property of the company.
&c' An instrument charging the
property of the company with the
2. A company that ma$es an
in(itation to the public to ta$e up
debentures or accept money from
the public obliged to issue
document which ac$nowledge the
company’s indebtedness in respect
1. "ncrease the share capital by the
creation of new shares of such amount as
the company thin$s e)pedient.
2. Table A. Article *+ &a' allows a
company by ordinary resolution from time
to time to increase its share capital by such
sum to be di(ided into shares of such
amount as the resolution shall prescribe.
3. "ncrease of share capital merely
increase the amount of nominal or
authori,ed share capital of the company.
*. -ot applicable for issued or paid up
share capital.
.. "f the pro(ision in Table A is e)cluded
and article of association do not gi(e
of the loan or deposit.
The debenture pro(ision in #art "/
Di(ision * of the Act apply to this
0nly public company may ma$e
in(itation to the public to lend to
#ri(ate companies are re!uired by
section 1.&1' to ha(e in their
1emorandum or articles a clause
prohibiting the issue of debentures
or accepting money from public.
authority to increase company’s share
capital need to be done by special
resolution under section 31 &1' to pro(ide
the rele(ant authority.
2ost 1. 2alling a general meeting to consider an
increase of share capital the notice
con(ening the meeting shall be specify the
proposed increase.
2. "f a company has increased its share
capital beyond its registered capital must
within 1* days after passing the resolution
authori,ing the increase lodge with the
registrar the notice of increase.
3. "f there is a default the company and
e(ery officer of the company who is in
default will be liable to the fine.