Classifications of Company Capital
Capital is essentially needed by an organization which is profitable or non-profitable. Capital is the money or a monetary value by which a firm runs its activities is called the capital of the concerned firm. All businesses must have capital in order to purchase assets and maintain their operations. By nature and by law we can classify company capital in various classes. The classifications of a company capital are given below:
Authorized or Nominal or Registered Capital
The amount of capital of a company is mentioned in the Memorandum of Association and registered by the authority is called the authorized or nominal or registered capital. That mean a company is registered on the amount of capital is called authorized capital. For example, the authorized capital of Sonali Bank Ltd is TK. 1000 crore. The bank can collect capital up to Tk 1000 crore from shareholders.
The portion of authorized capital presented in prospectus to the common people and issued by share for funding is called issued capital. The issued capital is often less than the authorized capital. The issued capital may be equal to the authorized capital but never excess than the authorized capital.
Un-issued capital is the part of authorized capital minus issued capital (Authorized capital – Issued capital = Un-issued capital). The part of authorized capital is not issued in the market for general people. For example, a company’s authorized capital is Tk. 500 crore and it issued Tk. 350 crore for the shareholders. So its un-issued capital is Tk. 150 crore.
Subscribed capital is the part of issued capital for which shareholders are applied. That is the amount applied for and distributed to the shareholders. Subscribed capital may be equal to the issued capital but cannot more than issued capital.
Called up Capital
Called up capital is the part of subscribed capital for which company demands for payments. Company by notice inform the shareholders to pay the called amount they applied for to pay the dues. Called up capital may same as the subscribed capital if a company calls for payments of whole amount which have been applied for.
Paid tip capital is the part of called up capital that applicants pay through the banks in due time to company. Company may allow the applicants to pay the amount of capital by installments or to pay the whole sum at a time. If any applicant cannot pay the sum, the company forfeits the share and the applicants have nothing to claim for previous paid amount.
Unpaid capital is the part of called up capital. If any applicant or a group of applicants fail to pay or does not pay called up capital in time. A company can forfeit the unpaid share and can reissue for sale in next time. The share applicants will not get any compensation. It’s a capital gain for the company.
Uncalled capital is the portion of the subscribed capital is a company does not call for payment. For example, a company issues share for Tk. 100 each and calls for Tk. 90 to pay. In this case Tk. 10 is uncalled.
Company may make any reserve capital for well being for future, part of capital, unsubscribed capital for emergency, is called reserved capital. A company may use the capital in time of winding up of the company.
From the above discussion we can say that a company can divide the capital in the above way but out of the classification, company may base another type of capital which is needed for the development of business activities.