Company Accounts: Issue, Forfeiture, and Re-issue of Shares Vocabulary

This set of vocabulary flashcards covers essential terms, definitions, and legal provisions related to company share capital, types of shares, and the accounting for issue, forfeiture, and re-issue based on the Companies Act, 2013 and SEBI regulations.

Share

A small indivisible unit of a fixed amount into which the total capital of a company is divided.

Nominal Value

The fixed value of a share printed on the share certificate, also referred to as the par value or face value.

Shareholders

Holders of shares whose liability is limited to the issue price of the shares acquired by them.

Authorised Share Capital

The maximum amount of capital a company is authorised to raise during its lifetime, as mentioned in the 'Capital Clause' of the 'Memorandum of Association'.

Issued Share Capital

The portion of the authorised share capital issued by the company for cash or for consideration other than cash to promoters or others.

Subscribed Share Capital

The part of the issued share capital which is applied for by the public and subsequently allotted by the company.

Called-up Share Capital

The portion of the issue price of shares that the company has demanded or called from shareholders for payment.

Paid-up Share Capital

The portion of the called-up capital which is actually paid by the shareholders.

Calls-in-Arrears

The total unpaid amount on one or more instalments that has been demanded by the company but not yet received from the shareholders.

Call-in-advance

The portion of capital which is yet to be called by the company but has already been paid by a shareholder.

Reserve Share Capital

The portion of uncalled capital that a company decides, by passing a resolution under Section $65$ of the Companies Act, $2013$, to call only in the event of winding up.

Capital Reserve

Reserves created out of capital profits that are part of 'Reserves and Surplus' and are not available for the declaration of dividends.

Preference Shares

Shares that assure holders of a preferential dividend at a fixed rate and a preferential right to be paid first during the winding up of the company.

Cumulative Preference Shares

Preference shares that carry the right to a fixed dividend that accumulates and is payable out of future profits if current year profits are insufficient.

Participating Preference Shares

Preference shares that confer the right to participate in surplus profits or surplus assets on winding up after equity shareholders have been paid at a stipulated rate.

Redeemable Preference Shares

Shares issued on the condition that the company will repay the capital after a fixed period or earlier at the company's discretion, governed by Section $55$ of the Companies Act, $2013$.

Equity Shares

Shares that are not preference shares, carrying voting rights and no preferential rights regarding dividend payment or capital repayment.

Sweat Equity Shares

Equity shares issued by a company to its directors or employees at a discount or for consideration other than cash for providing know-how or intellectual property rights.

Book Building

A process through which a company determines its share prices by receiving bids from potential investors within a predetermined price band.

Minimum Subscription

The minimum amount stated in the prospectus that must be subscribed by the public; per SEBI guidelines, this must be at least $90\%$ of the offer.

Securities Premium Account

An account credited with the excess of the issue price over the face value when shares are issued at a premium.

Pro-rata Allotment

The allotment of shares in proportion to the number of shares applied for in cases of over-subscription.

Forfeiture of Shares

The action taken by a company to cancel shares when a shareholder fails to pay allotment or call money on the due dates.

Re-issue of Shares

The sale of forfeited shares by a company, which is treated as a sale rather than a new allotment of shares.

Table F Interest Rates

The regulations prescribing maximum interest rates of $10\%$ p.a. for calls in arrears and $12\%$ p.a. for calls in advance.