ChapterIssue of shares Introduction of joint stock companyAccording
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Chapter—Issue of shares Introduction of joint stock company--According to section 3(1)(i) of indian companies act 1956 -”company means a company formed and registered under this act or an existing company. According tosection 3(1)(ii)—existing company means a company formed and registered under any of the previous company law. According to prof. haney—”a company is an artificial person, created by law having a separateentity with a perpetual succession and a common seal.
Features of a company Incorporated association l Separate legal entity l Perpetual succession l Limited liability l Common seal l Maintenance of books as per companies act l
Share capital l l l l The capital of the company raised through issue of shares is share capital. Kinds of share capital--Authorised capital Issued capital Subscribed capital Called up capital Paid up capital Reserve capital
share The capital of a company is divided into a number of equal parts. Each part is called a share. l Types of shares----preference shares l -----------equity shares l Preference shares are shares having following two preferencesl At the time of payment of dividend l At the time of return of capital l
Types of preference shares Cumulative preference shares l Non-cumulative preference shares l Redeemable preference shares l Non-redeemable preference shares l Participating preference shares l Non-participating preference shares l Convertible preference shares l Non-convertible preference shares l
Equity shares l l l l l An equity share is a share which is not preference share. Difference between pref. & equity shares. Pts. of difference-------Rate of dividend Priority in payment of dividend Participation in management Return of capital Arrears of dividend Voting rights
Capital reserve l l l l The reserve which is created out of capital profit is known as capital reserve. Dividend can not be paid out of this reserve but it can be used to meet capital losses or to declare a bonus share. Following are the principal sources of capital reserve--Profit on sale of a fixed asset Profit on revaluation of assets& liabilities Profit on forfeiture & reissue of forfeited shares Profit on redemption of debentures at a discount Profit earned by a company prior to its incorporation Capital reserve is shown in liability side of b/s under the head ‘reserve and surplus.
Difference b/w Res. Cap. & Capital Reserve Serial no. Basis of difference Reserve capital Capital reserve 1 meaning Portion of uncalled capital Created out of capital profits 2 resolution Special resolution No need of resolution 3 amount Which has not been recieved Which has already been recd. 4 a/cting treatment No treatment 5 use Shown in b/s Can be called Can be used to up at the time of meet cap. losses. liquidation.
Preliminary expenses l l l l Expenses incurred on the formation of a company aretermed as preliminary exps. These include. Expenses on preparation & printing of co. documents. Stamp duty ®n. fee on these documents. Duty on authorised capital. Exps. On preparation, printing & issue of prospectus. Underwriting commission. Cost of preliminary books &common seal.
Treatment of preliminary expenses l These exps. may be written off against security premium a/c. otherwise these may be written off from proifit & loss a/c. gradually over some period. The unwrittenoff portion of preliminary expenses is shown on the asset side of the b/s under the heading ‘miscellaneous expenditure. ’