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__NOTOC__ 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 capitalGlossary on Trade Financing Terms - S
in the United States commonly referred to as capital
stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities i ...

stock
, is the portion of a corporation's
equity Equity may refer to: Finance, accounting and ownership *Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the differe ...
that has been derived by the issue of
share Share may refer to: * Share, to make joint use of a resource (such as food, money, or space); see Sharing * Share (finance), a stock or other financial security (such as a mutual fund) * Share, Kwara, a town and LGA in Kwara State, Nigeria Share ma ...
s in the corporation to a shareholder, usually for
cash In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
. "Share capital" may also denote the number and types of shares that compose a corporation's share structure. In
accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compare with other ob ...
, the share capital of a corporation is the nominal value of
issued sharesIn finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available w ...
(that is, the sum of their
par value Par value, in finance Finance is a term for the management, creation, and study of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were ampu ...
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 to act as a single entity (a legal entity recogni ...
, 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 claimThe 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 thi ...
; 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. 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). The legal aspects of share capital are mostly dealt with in a jurisdiction's
corporate law Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules t ...
system. An example of such an issue is that when a company allocates new shares, it must do so without inequitably
diluting In chemistry, concentration is the abundance of a constituent divided by the total volume of a mixture. Several types of mathematical description can be distinguished: #Mass concentration, mass concentration, #Molar concentration, molar concentrat ...
its existing shareholders.


Legal capital

Legal capital is a concept used in
UK company law The United Kingdom company law regulates corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (p ...
,
EU company law European corporate law is a part of European Union law, which concerns the formation, operation and insolvency of corporations in the European Union. There is no substantive European company law as such, although a host of minimum standards are ap ...
, and various other
corporate law Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules t ...
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.


Minimum capital

In the UK, a
public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a company whose ownership is or ...
must have a minimum legal capital of £50,000. There is no such requirement for a
private company A privately held company or private company is a company which does not offer or trade its company stock (share (finance), shares) to the general public on the stock market exchanges, but rather the company's stock is offered, owned and traded or ...
.


Classes of shares

The share capital may be made up of more than one class of shares. Different classes of shares include ordinary shares, preference shares, growth shares and deferred shares. Shares will be a separate class if the rights attached to them differ from the rights attached to other shares in the capital of the company.


See also

*
Balance sheet In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such ...

Balance sheet
*
Market capitalization Market capitalization, commonly called market cap, is the market value of a publicly traded company A public company, publicly traded company, publicly held company, publicly listed company, or public limited company A public limited compan ...
*
Paid in capital Paid-in capital (also paid-up capital and contributed capital) is capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or ...
*
Share premium account 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 ...
*
Shareholders' equity In finance, equity is ownership of asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information ab ...
* Stock capital impairment *
UK company law The United Kingdom company law regulates corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (p ...


References


External links


Detailed breakdown
from
Companies House Companies House is the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Ki ...
{{Authority control Corporate law Financial capital