SHARE CAPITAL

Introduction:

Companies generally issue shares to raise money for some kind of proposed expenditure,such as building a new product plant, carrying out new research or buying another company.Share holders bring money into the company in return for a slice of ownership. It is share holders and not the directors who therefor own the company.


Explaination:

Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has change over time because each time a business sells news shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preffered shares.

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 also known as equity financing through which the share holders of the issud capital receive rights of ownership in the concerned company by bying 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.

Amount of share capital a company possess is a valuable. As a company issues more and more shares to the public in lieu of found,the amount of share capital increase.
The difference between the authorized and issued share capital represents the number and value of share that the company can issue should it need to raise further capital. Therefor issued share capital could share around 2.3 billion shares.authorised capital share could share around 9.2 billion shares.

Share capital may consists of:

a)common share:

It gives an ownership right to the holders of the stock and hence the share holders are entitled to the earnings of the company according to their stake.Holders also get dividends on those stocks as and when given by the company.Liberty of common stocks are very high and can be bought and sold at any time of the market hours.

b)Preffered share:

These stocks also give ownership right to its holders.Its holders enjoy the privilege of receiving dividends from the company in preference to any other common share holders.
Preffered stocks hava less liquidity than the common stocks.





Share capital issues are most likely to benefit the small business who suffer fro lack of initial cash flow. Through this, small business get easy access to fund. Share capital are also advantageous to a small business owner because he has no obligation for repayment of money to the investor.

The main disadvantage of financing through share capital route is that the owner has to giv-up certain amount of control from the business because buyers of the share capital become part owners of the company in accordance to their stake in the same and hence possess certain degree of control over its operation. Thus, the owner is now free to take any decision as per his ideas but has the obligation of getting it approved from the board of share holders.