ACCOUNTING FOR SHARE

CAPITAL
BUSINESS ORGANISATION

SOLE PROPRIETORSHIP

PARTNERSHIP FIRMS

COMPANY
 COMPANY
• An association of persons
• Come together for a common object
• Carry on some business for profit
 COMPANY
• An artificial person, created by law, with a fixed
capital, divisible into shares, with perpetual
succession and common seal.
• Has a separate legal entity.
• Must be compulsorily registered.
• Owned by its shareholders
• Managed by the Board of Directors.
• The liability of the shareholders is limited to the face
value of shares held by a particular shareholder.
 FEATURES
• Legal entity
• Perpetual succession
• Registered voluntary association
• Limited liability of the member.
• Transferability of shares.
• Management
• Common seal
 DEFINITION
• According to the Sec 2(20) of the Companies
act, 2013, “ a company incorporated under
this act or under any previous company law.”
 TYPES OF COMPANY
• On the basis of Incorporation
• On the basis of Liability
• On the basis of Transferability of Shares.
• On the basis of Listing with Stock Exchanges.
• On the basis of No. of persons holding the
share
• On the basis of Exercising Control
 ON THE BASIS OF INCORPORATION

CHARTERED STATUTORY REGISTERED

COMPANIES COMPANIES COMPANIES
 CHARTERED COMPANIES
• Created under Royal Charter issued by the
Crown (King or Queen)
• Eg. East India Company, Bank of England
• Royal charter is a document signed by the king
or queen
 STATUTORY COMPANIES
• Formed by a special act of the Parliament or
State Legislature
• Reserve bank of India, Life Insurance
Corporation of India
 REGISTERED COMPANIES
• Formed and registered under the Companies Act,
2013 or the earlier Companies Act.
• Sub divided into three categories:
a. Company limited by shares
b. Company limited by guarantee
c. Unlimited companies
Further these companies are of the following types:
I. Public Company
II. Private Company
 ON THE BASIS OF LIABILITY

LIMITED BY LIMITED BY UNLIMITED

SHARES GUARANTEE COMPANIES

THE LIABILITY OF ITS

MEMBERS IS LIMITED
COMPANY HAVING UPTO THE AMOUNT
THE LIABILITY OF ITS WHICH A MEMBER WHERE THE LIABILITY
MEMBERS LIMITED HAS UNDERTAKEN TO OF A MEMBER IS NOT
BY THE CONTRIBUTE TO THE LIMITED.
MEMORANDUM TO ASSETS OF THE
THE AMOUNT COMPANY IN THE
EVENT OF ITS BEING
WOUND UP.
 Company limited by guarantee
• THE LIABILITY OF ITS MEMBERS IS LIMITED UPTO
THE AMOUNT WHICH A MEMBER HAS UNDERTAKEN
TO CONTRIBUTE TO THE ASSETS OF THE COMPANY
IN THE EVENT OF ITS BEING WOUND UP.
• Members of the company are liable to pay only the
guaranteed amount which is mentioned in MOA of
the company.
• Members are liable to pay only at the time of
winding up of the company.
 ON THE BASIS OF TRANSFERABILITY OF SHARES
PRIVATE COMPANY
1. MINIMUM PAID UP SHARE
CAPITAL OF 1 LAKH
2. MINIMUM 2 MEMBERS AND
MAXIMUM 200 MEMBERS
3. RESTRICTS THE RIGHT TO
TRANSFER ITS SHARES
4. EXCEPT IN CASE OPC , LIMITS
THE NUMBER OF ITS MEMBERS
TO TWO HUNDRED.
5. PROHIBITS ANY INVITATION TO
THE PUBLIC TO SUBSCRIBE FOR
ANY SECURITIES OF THE
COMPANY.
PUBLIC COMPANY
1. IS NOT A PRIVATE COMPANY
2. HAS A MINIMUM PAID UP
SHARE CAPITAL OF 5 LAKHS
3. SHARES ARE TRANSFERABLE
4. MINIMUM 7 MEMBERS AND
NO RESTRICTION ON THE
MAXIMUM
5. CAN INVITE SUBSCRIPTION
FOR ITS SHARE CAPITAL FROM
THE PUBLIC.
BASIS PUBLIC COMPANY PRIVATE COMPANY

1. Minimum 7 2
members

2. Maximum No restriction 200

members

3. Suffix limited Private limited

4. Public Allowed Not allowed

subscription

5. Transferability Freely transferable Restricted

of shares

6. Section Sec 2(68) of the companies Sec 2(71) of the companies act,
act, 2013 2013
 On the basis of listing with stock exchange

Securities appear in
Listed
the listcompanies
of Stock Unlisted companies
Exchange. To be
listed in the
securities exchange,
a company will have A company whose
to file an application securities do not
with the stock appear in the list of
exchange. When the stock exchange is
company meets the called unlisted
certain requirements company.
and follow the rules
of the stock
exchange , it is
known as listed
company.
 those
On the basis of composition of shareholders

Closely held companies widely held companies

Those public companies where Those public companies

shares of the company held by a
few members. The shares are
held mostly by the members of
the same family or among the
members in the group companies.
where shares are held by
large number of persons.
Members may be from all
over the world.
 On the basis of exercising control

Holding company Subsidiary company

1. sec 2(87),
2. Which controls
another company
by owing its all or Which is controlled
majority of the by another
company known as
shares carrying holding or parent
voting rights or company.
controlling the
composition of its
BOD.
 Government company
1. Defined in the sec 2(45) of the companies
act, 2013.
2. 51% of the share capital is held by the Central
Govt or the State Govt. or partly by the State
and Partly by the Central govt.
3. A subsidiary of a government company will
also be treated as a govt company.
 One person company
• There is a concept in the companies act 2013 that, one
person can constitute a company.
• According to sec 2(62) of the act, “one person company
means a company which has only one member”.
• It is a legal entity. The principles of one person company are
same as a company.
• But it has only one member or one shareholder where the
legal and financial liability is limited to the company only not
to the owner of the company.
• It is an alternative for the sole proprietorship bussines,
where the liabilities of the owner is unlimited.
 Small company
• Defined in the sec 2(85) of the companies act,
2013
• A company other than a public company-
a. Paid-up
 Non profit making company
• Defined in the sec 8 of the companies 2013
• It is a limited company with an objective to promote
commerce, art, science, sports, education, research,
social welfare, religion, charity etc.
• If there is any profit or any other income, the utilize
the amount in promoting the objects of the
company.
• The company does not pay any kind of dividend to
its members.
 share
• The capital of a company is divided into equal
units , each unit is known as share.
• Total capital 20,00,000 divided into 1,00,000
equal units of Rs. 20 per unit.
• Each unit or part will be known as share of Rs.
20 each.
 Features of shares
• 1. movable property.
• Transferable in the manner provided by the
Articles of Association of the Company.
• These can by sold, bought, hypothecated and
bequeathed like any other movable property.
• Shares are treated as goods under the Sales of
Goods Act, 1930.
 Types of shares
• Equity shares:
Sweat equity shares
Preference shares