Share capital: Difference between revisions
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{{Short description|Portion of a company's equity}} |
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{{Use American English|date=December 2023}} |
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| ⚫ | A [[corporation]]'s '''share capital''' |
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{{Use mdy dates|date=December 2023}} |
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{{More citations needed|date=May 2022}} |
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[[File:Boston American League Base-Ball Club 1911.jpg|thumb|Share certificate of the Boston American League Base-Ball Club shows a capital [[stock]] of 100 000$]] |
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| ⚫ | A [[corporation]]'s '''share capital''', commonly referred to as '''capital stock''' in the United States, is the portion of a corporation's [[Shareholders' equity|equity]] that has been derived by the issue of [[Share (finance)|shares]] in the corporation to a shareholder, usually for [[cash]]. ''Share capital'' may also denote the number and types of shares that compose a corporation's share structure. |
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| ⚫ | In |
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==Definition== |
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Sometimes, shares are allocated in exchange for non-cash consideration, most commonly when corporation A acquires corporation B for shares (new shares issued by corporation A). Here the share capital is increased to the par value of the new shares, and the merger reserve is increased to the balance of the price of corporation B. |
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| ⚫ | In [[accounting]], the share capital of a corporation is the nominal value of [[issued shares]] (that is, the sum of their [[par value]]s, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called [[share premium]], additional paid-in capital or paid-in capital in excess of par).{{Citation needed|date=December 2023}} |
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This equation shows the constituents that make up a company's real share capital: |
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In practice, the concept of "par value" has very little meaning, since shares usually represent a [[residual claim]]; they do not endow their owners with a claim toward any fixed sum of money. In some jurisdictions, share par values have been either abolished or made optional, so a corporation can issue shares having no par value. In that case, from an accounting perspective, all of the corporation's share capital is premium. |
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: <math>\sum\text{Share capital = Number of shares issued} \times \text{(Par value + Share premium)}</math> |
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This is differentiated from share capital in the accounting sense, as it presents nominal share capital and does not take the premium value of shares into account, which instead is reported as additional paid-in capital.<ref>{{cite web |title=Share Premium Account |url=https://corporatefinanceinstitute.com/resources/wealth-management/share-premium-account/ |publisher=Corporate Finance Institute |date=December 13, 2022 |access-date=August 13, 2023 }}</ref> |
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Besides its meaning in accounting, described above, "share capital" may also describe the number and types of shares that compose a corporation's share structure. A corporation might have an "outstanding share capital" of 500,000 shares (the "structure" usage); it has received for them a total of 2 million dollars, which is the "share capital" in the balance sheet (the accounting usage). |
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The legal aspects of share capital are mostly dealt with in a jurisdiction's [[corporate law]] system. An example of such an issue is that when a company allocates new shares, it must do so without inequitably [[share dilution|diluting]] its existing shareholders. |
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==Legal capital== |
==Legal capital== |
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'''Legal capital''' is a concept used in [[ |
'''Legal capital''' is a concept used in [[European corporate and foundation law]], [[United Kingdom company law]], and various other [[corporate law]] jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares.<ref name="WSM">{{cite web |last=Thakur |first=Madhuri |editor-last=Vaidya |editor-first=Dheeraj |date=August 29, 2020 |title=Legal Capital |url=https://www.wallstreetmojo.com/legal-capital/ |website=WallStreetMojo.com |publisher=CFA Institute |access-date=May 12, 2022 }}</ref> The law often requires that this capital is maintained, and that dividends are not paid when a company is not showing a profit above the level of historically recorded legal capital.<ref name="WSM" /> |
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In the UK, a public limited company must have a minimum legal capital of £50,000. There is no such requirement for a private company. |
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==See also== |
==See also== |
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{{Div col|colwidth=20em}} |
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<!-- New links in alphabetical order please --> |
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*[[Balance sheet]] |
* [[Balance sheet]] |
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*[[ |
* [[Capital impairment]] |
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*[[ |
* [[Market capitalization]] |
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*[[ |
* [[Paid-in capital]] |
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*[[ |
* [[Share dilution]] |
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*[[ |
* [[Share premium account]] |
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{{Div col end}} |
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==References== |
==References== |
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{{ |
{{Reflist}} |
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==External links== |
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*[https://web.archive.org/web/20100403060956/http://www.companieshouse.gov.uk/about/gbhtml/gba6.shtml Detailed breakdown] from [[Companies House]] |
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{{Stock market}} |
{{Stock market}} |
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{{Authority control}} |
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[[Category:Corporate law]] |
[[Category:Corporate law]] |
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Latest revision as of 15:32, 27 October 2024
 | This article needs additional citations for verification. (May 2022) |
A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. Share capital may also denote the number and types of shares that compose a corporation's share structure.
Definition
[edit]In accounting, the share capital of a corporation is the nominal value of issued shares (that is, the sum of their par values, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called share premium, additional paid-in capital or paid-in capital in excess of par).[citation needed]
This equation shows the constituents that make up a company's real share capital:
This is differentiated from share capital in the accounting sense, as it presents nominal share capital and does not take the premium value of shares into account, which instead is reported as additional paid-in capital.[1]
Legal capital
[edit]Legal capital is a concept used in European corporate and foundation law, United Kingdom company law, and various other corporate law jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares.[2] The law often requires that this capital is maintained, and that dividends are not paid when a company is not showing a profit above the level of historically recorded legal capital.[2]
See also
[edit]References
[edit]- ^ "Share Premium Account". Corporate Finance Institute. December 13, 2022. Retrieved August 13, 2023.
- ^ a b Thakur, Madhuri (August 29, 2020). Vaidya, Dheeraj (ed.). "Legal Capital". WallStreetMojo.com. CFA Institute. Retrieved May 12, 2022.
