HOME

TheInfoList



OR:

A
corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal ...

corporation
's share capital, commonly referred to as capital
stock In finance, stock (also capital stock) consists of all the Share (finance), shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which owners ...

stock
in the United States, is the portion of a corporation's equity that has been derived by the issue of
shares In finance, financial markets, a share is a unit of Equity (finance), equity ownership in the capital stock of a corporation, and can refer to units of mutual funds, limited partnerships, and real estate investment trusts. Share capital refers t ...
in the corporation to a shareholder, usually for
cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-immed ...
. "Share capital" may also denote the number and types of shares that compose a corporation's share structure.


Definition

In
accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been calle ...
, the share capital of a corporation is the nominal value of
issued shares In finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption ...
(that is, the sum of their
par value Par value, in finance and accounting, means stated value or face value. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value). Bonds A Bond_(finance), bond selling at par is priced at 1 ...
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 Capital surplus, also called share premium, is an account which may appear on a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a le ...
, additional paid-in capital or paid-in capital in excess of par). Commonly, the share capital is the total of the nominal share capital and the premium share capital. Most jurisdictions do not allow a company to issue shares below par value, but if permitted they are said to be issued at a discount or part-paid. 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. In practice, the concept of "par value" has very little meaning, since shares usually represent a
residual claim The residual claimant refers to the economic agent who has the sole remaining claim on an organization's net cash flows, i.e. after the deduction of precedent agents' claims, and therefore also bears the residual risk. Residual risk is defined in th ...
; 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.


Legal capital

Legal capital is a concept used in
European corporate and foundation law European organisational law is a part of European Union law, which concerns the Incorporation (business), formation, operation and insolvency of public bodies, partnerships, corporations and foundation (non-profit), foundations in the entire Eu ...
,
United Kingdom company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directive (European Union), Directives and court cases, the co ...
, and various other corporate law jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares. 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.


See also

*
Balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a busine ...

Balance sheet
*
Capital impairment Capital impairment is the case when the company lost its asset, so the asset is lower than the stock of a company. One way to avoid capital impairment is reduction of capital without any compensation. See also

*Bankruptcy *Reduction of capita ...
*
Market capitalization Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders. Market capitalization is equal to the market price per common share multiplied by ...
*
Paid in capital Paid-in capital (also paid-up capital and contributed capital) is financial capital, capital that is contributed to a corporation by investors by purchase of stock from the corporation, the primary market, not by purchase of stock in the open ma ...
*
Share dilution Stock dilution, also known as equity dilution, is the decrease in existing shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body ...
*
Share premium account Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par v ...


References

{{Authority control Corporate law Financial capital