In the business world phrase "share capital" you will hear a lot, but what it actually means? In this article, we will find out the meaning of share capital!
What is share capital?
The share capital is the portion of a corporation's equity that has been obtained by the issue of shares in the corporation to a shareholder, usually for cash, it is also known as a corporation's share capital or capital stock in US English.
Share capital in a strict accounting sense
The share capital is the nominal value of issued shares - that is, the sum of their par values, as indicated on share certificates.
If the allocation price of shares is greater than their par value, e.g. as in a rights issue, the shares are said to be sold at a premium - variously called share premium, additional paid-in capital or paid-in capital in excess of par.
What is Legal capital?
Legal capital is used in UK company Law and EU company law and other corporate law jurisdictions to refer to the sum of assets contributed to a company by shareholders when they have 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.
