TOPIC:

INTRO to Share
capital
 Overview of Topic:
Part A: Nature of shares

Part B: Authorised and paid up share capital

Part C: Classes and kind of share capital

Part D: Variation of shareholders’ rights

Part E: Right to challenge the variation in the court

Part F: Alteration of share capital clause in

memorandum
 Part A:
Nature of shares
[Section 60 to 62]
 Definition:
Share [Section 2(63)]:
“share” means a share in the
share capital of a company.
Shares and share certificates have
several characteristics:
--- A share is a form of movable property, carrying rights
and obligations, and is transferable from one person to
another in the manner provided by articles.
--- A share must be paid for. It must be paid for in full
when it is allotted to the shareholder.
--- Every share in a company having a share capital shall be
distinguished by its distinctive number.
--- A certificate issued in physical form under common seal
of the company or issued in book-entry form (i.e.
electronic) shall be the main evidence of the title of the
person to such shares.
--- The manner of issue of a certificate of shares, form of
such certificate and other matters may be specified in
articles.
Issuance of shares is the first
step of offering shares by the
company, then people or
promoters pay for the shares,
this is termed as subscription of
shares and finally shares are
allotted to respective names of
applicants, this is termed as
paying up of the capital.
 Part B:
Authorised and
paid up share
capital
Definition: Authorised share
capital [Section 2(5)]
“authorised capital” or
“nominal capital” means such
capital as is authorised by the
memorandum of a company
to be the maximum amount
of share capital of the
company.
 Issued and paid up share
capital

The nominal value of shares

that have been issued to
shareholders. This amount
may be equal to or less than
authorised share capital but
cannot exceed it. This is also
Publication of authorised and paid up capital
[Section 25]

Where any notice, advertisement or other official

publication of a company contains a statement of
amount of authorised capital of the company, such
notice, advertisement or other official publication
shall also contain a statement in an equally
prominent position and in equally conspicuous
characters of amount of the paid up capital.

Any company which makes default in complying

with the requirements of above and every officer of
the company who is party to the default shall be
liable to a penalty not exceeding of level 1 on the
Fully paid shares [Section 58]

A company having share

capital shall issue only fully
paid shares. Many years ago,
it was allowed to issue partly
paid shares but now
companies can only issue
 Example 01
Liability of shareholders
ABC Limited, a public company has authorised
share capital of 800,000 ordinary shares of Rs.10
each (Rs. 8,000,000 in total). The nominal value of
the shares is Rs.10 per share. The issued share
capital is 400,000 ordinary shares. All of these,
400,000 shares are fully paid.
Authorised share capital is Rs. 8,000,000 (800,000
shares of Rs. 10). Issued share capital is 4,000,000
(400,000 shares of Rs. 10). The maximum liability
of the shareholders for the unpaid debts of the
company, in the event of the company’s
liquidation, is zero as all of the nominal value is
Nominal value
This is face value of shares, also called
par value and stated value.

Market value
This is the value at which share are
traded at stock exchange or otherwise.
This is usually higher than nominal
value.