Share capital is the amount of money that is raised by the company by issue of shares. Shares are indivisible units of the capital of the enterprise. On the other hand, capital maintenance is a combination of laws that are designed to ensure that a company can obtain the capital it claims to raise. Secondly, capital is maintained, focusing on the demands of the company for the protection and benefit of the creditors of the company and the release of its liabilities. The objective of this paper is to give a description of the types of capital, how dividends are paid to shareholders and if they are obliged to get it or not and how one person can get access to the shares of the company. In company law, there are seven types of capital. Authorized capital is the nominal value of shares that the company has the power to issues by its memorandum of association. It is the largest quantity of capital that the company can have. This amount of capital can be raised or decreased on the condition that the company changes the memorandum. It can also be known as registered capital. Issued capital is another form of capital. It is the nominal value of shares that is given to the public for subscription. It shows the part of the nominal capital that has been given out to be subscribed by the public or any other persons concerned.
Subscribed capital is another type of capital. It is a portion of the issued capital taken up by the public. If all issued capital is subscribed, then the issued capital and subscribed capital are equal. Called up capital is a portion of the issued capital that has been called up on the shares. It is the part of the issued capital which stakeholders must pay as and when called. Paid up capital is part of the issued capital that has been paid by stakeholders. If calls are made on shares and stakeholders do not pay up the amount thus owing they are called calls in arrears or calls unpaid.
Another type of capital is reserve capital. It is any portion of the share capital of the company that a company can resolve by a special resolution not to be called except in the event of winding up. A company by special resolution may identify that any part of its uncalled capital be reserve capital. Reserve capital can only be turned into uncalled capital by leave of the court. Contingency fund or reserves refer to the undistributed profits kept by companies to cater for emergencies. Uncalled capital is another form of capital. It is the remaining issued capital that has not been called. The company may call this amount any time, nevertheless, it is subject to terms of issue of shares and the provisions of the Articles.
Dividends are commercial earnings that shareholders are passed on to by their companies. There are plenty of explanations as to why a corporation may decide to give a portion of its earnings as dividends. There are also plenty of causes as to why it may desire to reinvest every of its earnings into the business. The company that is developing swiftly frequently does not pay dividends. It is the reason because it needs to invest as much as possible to increase the company’s growth. Even an established firm which believes it will perform a good job of escalating the value by reinvesting its earnings will decide against paying its dividends. Those companies that do not pay dividends may choose to use the money for starting a new project. It may also decide to get new assets, buy some of its shares or even buy out other companies.
The decision to not pay dividends might be valuable to investors from a tax viewpoint. Dividends are payable to shareholders as ordinary earnings. It means that the tax rate for an investor on dividends is equal to her marginal tax rate. The marginal tax rates can get as high as thirty-five percent. The gains on capital on appreciated stock sale may have a reduced, long-term capital tax rate benefits only if the investor holds the stock for as long as one year. The companies that decide to invest their entire earnings rather than issuing dividends again might also be discerning about the increased potential of new stock issuance. To evade this risk of wanting to raise money in this way, they decide to keep their entire earnings. Nevertheless, for a developed company which does not need to invest again in itself, and has steady gains, there are plenty of reasons why the issuance of dividends may be an excellent idea.
Many investors prefer the stable income that is associated with dividends. Hence, it will be more likely for investors to buy the stock of the company. Investors also view the payment of dividends as a sign of the strength of the company and as a sign that the administration has positive prospects for earnings of the future. It makes the stock very eye-catching. A larger demand for the stock of the company will escalate its price. A company again may decide not to pay the dividends since the choice to begin paying dividends or increase a standing payment of dividend is a serious one. A company that reduces or eliminates its rising dividend payment can be seen as unfavorable, and the price of the stock may decrease. Henry should know that dividends are typically paid to the shareholders if the company is mature and developed. For a starting company, it is better if the company doesn’t pay dividends to the shareholders because, reinvesting the money back in the company is a better assurance that the company will grow. The money can be used to start new projects, buy new assets or even repurchase some of its shares back. As explained above a share is a piece of property that can be transferred or sold. Having to hold a stock makes one a member of that company. In this case, if Alphonse buys shares from the farming solutions company, he will become a shareholder in the company. It means that he will be entitled to impose provisions of the constitution of the company against its members and the company itself. Since shares have a par value, it limits the shareholder’s liability to pay the debts of the company in case of a bankruptcy. These shares normally involve several rights on the holders like, rights to dividends, right to vote, rights to return of capital, right to partake in future share issues through the company. The entire number of shares that are issued in a company represents its capital. Several jurisdictions control the amount of capital that a company might have. Certain countries only recommend small amounts of companies that engage in some kinds of businesses like insurance and banking. Likewise, many jurisdictions control the capital maintenance and hinder companies taking funds back to stakeholders through distribution. It might leave the company being financially exposed. Some jurisdictions also prohibit a company from giving assistance that is financial for purchasing their shares. Insider trading is trading the stock of a corporation or other securities like stock options and bonds by people with possible access to information that is not public concerning the company. In several countries, trading through corporate insiders like directors, key employees, large shareholders and officers may be legal. It is only if the trading is performed in such a way that it does not take advantage of information that is public If Alphonse does buy the shares of Farming solutions limited, he will become a shareholder in that company. He will get access to the rights all shareholders are entitled to. An additional shareholder might maintain the capital of the company. It will make possible the desire of mark want to sell and maintain the machinery. If investors do increase, the company will take a toll and mature completely. In conclusion, the best way to get access to the share capital of an enterprise is through purchasing the shares when make public. It is the best way of making an individual a shareholder of a corporation. A shareholder can give up receiving his dividends for the further development of the company.
BIBLIOGRAPHYALEXANDER, R. (2007). Insider dealing and money laundering in the EU. Aldershot, England:
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BOURNE, N. (2011). Bourne on company law. New York: Routledge.CAHN, A. AND DONALD, D. (2010). Comparative company law. Cambridge: Cambridge
