CAPITAL

Capital is one of the three main factors of production (labour and natural resources are the other two), classified into physical capital (i.e., factories, machines, office, etc.) and human capital (i.e., training, skill, etc.).

In a joint stock company, the capital has various specific terms showing different forms of the share capital:

(i) Authorised Capital: This is the amount of share capital fixed in the Memorandum of Association (MoA) and the article of association of a company as required by the Companies Act. This is also known as the Nominal or Registered Capital.

This is the limit (i.e., nominal value) upto which a company can issue shares. Companies often extend their authorised capital (via an amendment in the MoA) in advance of actual issue of new shares. This

allows the timing of capital issue to be fixed in light of the company’s need for new capital and the state of the capital market and allows share options to be excercised accordingly.

(ii) Paid-up Capital: The part of the authorised capital of a company that has actually been paid up by the shareholders. A difference may arise because all shares authorised may not have been issued or the issued shares have been only partly paid-up by then.

(iii) Subscribed Capital: The capital that has actually been paid by the shareholders (as they might have committed more than this to contribute). It means, the subscribed capital is the actually realised paid- up capital (paid-up capital is subscribed capital plus credit/due on the shareholders).

(iv) Issued Capital: The amount of the capital which has been sought by a company to be raised by the issue of shares (it should be kept in mind that this cannot exceed the authorised capital).

(v) Called-up Capital: The amount of share capital the shareholders have been called to pay to date under the phased payment terms. It is usually equal to the ‘paid-up capital’ of the company except where some shareholders have failed to pay their due installments (known as calls in arrears).