Company Law

Capital:
Definition: Assets available for use in the production of further assets

Forms of Capital: We can classified capital into different forms like Nominal/Authorized Capital Subscribed Capital/Minimum Subscription Called-up/Paid & Un-paid Capital

A. Nominal Capital/ Authorized Capital:

The memorandum of a company having a share capital must state the amount of share capital with which the company proposes to be registered and the division of the share capital into shares of a fixed amount. This is known as the nominal or authorized capital

 For Example: a company may decide to have a share capital of twenty thousand rupees divided into two thousand shares of ten rupees each In the above example the authorized or nominal share capital is twenty thousand rupees and the nominal or per value of each shares is Rs. 10/-

B. Subscribed Capital: Subscribed Capital is that part of the issued capital that has been accepted by the public

C. Called-up/ Paid & Un-paid Capital: Paid-up capital is essentially the portion of authorized stock that the company has issued and received payment for, while, Unpaid share capital is where none of the monies due for an allotment of shares which have been issued has been paid

Borrowing Powers: Companies are divided into two types for borrowing purposes
a)Trading Companies:- Implied powers b)Non-Trading Companies:- Need to include borrowing powers in their memorandum to enable them to raise funds by borrowing

Debentures: Debenture includes debentures stock, bonds, and any other securities of a company, whether constituting a charge on the assets of the company or not. [SEC 2(12)]. Debentures must be repaid before any amount is paid to preference or equity shareholders (Secured Loan)

Debentures: Is a certificate (like a share certificate) issued under the common seal of the company. The certificate is an acknowledgement by the company of indebtedness to a holder Provides for the payment of a specified principal sum at a specified date with contracted rate of interest Secured by a charge on the undertaking of the company, or on some class of its assets or on some part of its profits

Kinds of Debenture: Redeemable Debentures Perpetual or Irredeemable Debentures Registered and Bearer Debentures Secured and Unsecured or Naked Debentures Convertible Debentures

Charge: Charge is acquired as means for creditors to have recourse to assets in default of repayment of a loan or other advance in the event of insolvency

Two kinds of charge: Fixed charge is over the non-trading assets of the company like machinery , building , debts etc Floating charge is over the cash and stock-in- trade (because law considers shares Immoveable property)