Company Law Essay Help : Share Capital
All references to statute on this page are to the Companies Act 1985 unless otherwise stated.
Share capital can be defined as funds received by the company in return for the issue of shares - such an arrangement is contractual in nature. The issue of shares is regulated and limited by the Companies Act 1985 and by the constitution of the company, as defined in the memorandum and articles of association.
Authorised share capital is the amount of share capital that a company is authorised to allot by the apital clause in its memorandum of association.
Issued Share Capital is the amount of share capital that actually has been alloted. A private company must only issue two shares or one if it is a single member company. A public company on the other hand must issue at least £50,000 of share capital before it may trade.
Called up/Paid up share capital - this term is used to describe how much capital has actually been paid for the share. Members may only be required to pay, for example, 80p for each £1 share.
Uncalled Capital - This is simply the amount of issued share capital that has not been called up. Members have a continuing liability to pay this to the company so if, for example, a member holds 100 £1 shares and has paid up £80 (80p for each £1 share) they will continue to owe the £20 in uncalled capital.
Reserve Capital - This is any part of the uncalled capital which the company has resolved by specialresolution should only be called up in the event of liquidation, as a creditor's 'buffer'.
The raising of capital by alloting new shares is regulated by Part IV of the Companies Act 1985. The company will need to raise the authorised share capital if it is insufficient to cover the number of shares they wish to allocate. Directors must also get authority by ordinary resolution of the shareholders or by a provision in the articles of association before they allot 'relevant securities' (Section 80(1)). 'Relevant securities' are all shares in the company other than subscriber shares or shares allotted in connection with an employees' share scheme, so in practice, a resolution will be required in most cases.
This study area has been created by our experts to help students with Company Law Essay and Problem Questions. If you require further help with your question, why not order a fully customised model answer on which to base your assignment? Use our online order form to submit your request and you could have a complete model answer written to your specification within 24 hours.
