11. Share Capital(1).pptx

11. Share Capital(1).pptx - COMPANY LAW BAB 2202/LAW 2034...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
COMPANY LAW BAB 2202/LAW 2034 SHARE CAPITAL
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Share Capital Share Capital is the fund raised by a company through the issuance of common or preferential shares to individuals / institutional investors for the growth and expansion related aspects of the company. It is also known as Equity Financing through which the shareholders of the issued capital receive rights of ownership in the concerned company by buying shares of the same. Buyers of the Share Capital become owners of the company in accordance to their stake in the same and hence possess certain degree of control over its operation. SUNWAY UNIVERSITY
Image of page 2
Share Capital The amount of share capital a company possesses is a variable. As a company issues more and more shares to the public in lieu of fund, the amount of share capital increases. In the balance sheet of a company, issuing the share capital, it only reports the initial amount at which the share capitals were issued in the primary market. The company does not take into account any price appreciation or depreciation occurring due to the transactions in the secondary market into its balance sheet. SUNWAY UNIVERSITY
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Maintenance of Share Capital The common law has designed a number of rules to ensure that a company’s share capital remains intact as a fund to which the creditors can turn to as security for their debts. A reduction of share capital is generally illegal unless authorized by legislation: Trevor v Whitworth (1887) SUNWAY UNIVERSITY
Image of page 4
Maintenance of Share Capital Of course in practise the money obtained will be used to purchase assets and companies can obtain loans or incur debts exceeding the amount of capital secured or raised. However it is a fundamental rule that share capital must be maintained and that the company should not use the share capital except for the purposes set in the objects clause of the Memorandum. SUNWAY UNIVERSITY
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Maintenance of Share Capital The principle therefore means that: Paid up share capital must not be returned to members; Members’ liability in respect of the share capital not yet paid up must be reduced and Shares must be fully paid for.
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern