Q.Explain, with a suitable example, the different types of share capital of a company.

Three of the four terms describe the stages of share capital shown in a company's books; the fourth names a type of share. That fourth is the odd one.

A company's authorised capital is presented in successive layers as shares are issued and money is collected:

Agree. Authorised capital is the maximum share capital a company can legally issue, as fixed by the capital clause of its Memorandum of Association. It is also known as Nominal capital or Registered capital.

Explanation

• The capital clause of a company's Memorandum of Association states the maximum amount of capital the company is permitted to raise by issuing shares.
• This amount is called the Authorised capital, and it carries two other equally correct names: Nominal capital and Registered capital. …

Reserve capital is the part of a company's uncalled capital that it resolves to call up only in the event of winding up, for the benefit of creditors.

A company need not call the full face value of its shares at once. The amount not yet demanded from shareholders is uncalled capital. Out of this, a company may, by a special resolution, set aside a portion that it will NOT call during its normal working life — it can be called only when the company is being wound up. This earmarked amount is Reserve Capital. It should not be confused …

A security issued below its face value is issued at a discount; issued above face value is at a premium, and at face value is at par.

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