The company and its share capital

A company is an artificial person created by law. It is separate from the people who own it (its members or shareholders): it owns property, signs contracts, and can sue and be sued in its own name.

Its features:

• Limited liability: a shareholder can lose at most the unpaid amount on his shares, never his private property.
• Perpetual succession: the company goes on even when members die or sell their shares.
• Common seal: its official signature (now optional).
• Transferable shares: in a public company, shares can be sold freely.

Kinds of company: limited by shares, limited by guarantee, or unlimited. A private company has 2 to 200 members (not counting employees) and limits the transfer of its shares; a public company has no upper limit; a One Person Company has a single member.

Share capital is the money raised by issuing shares. It steps down like this:

• Authorised: the most the company may ever issue, fixed in its memorandum.
• Issued: the part actually offered to the public.
• Subscribed: the part the public took up.
• Called up: the part of the face value the company has asked for so far.
• Paid up: what has actually been received: called up minus calls in arrears.

The rest is still to come: uncalled capital may be called at any time; reserve capital is the part the company has decided to call only if it is wound up.

Example: 50,000 shares of ₹10 are issued, and ₹7 has been called; holders of 1,000 shares have not paid the last ₹2. Called up = 3,50,000; arrears = 2,000; paid up = 3,48,000.