I’ll keep this as brief as possible, and I won’t blame you if you fall asleep reading this – accounting classes used to bore me to death.
(1) Authorized Capital
Authorized Capital is the maximum amount that a company can raise through equity capital. It is defined in the memorandum of association document of the company, and if a company wants to increase its authorized share capital, a company will typically pass a special resolution in an extraordinary general meeting. This is sometimes called “Nominal” or “Registered” capital.
Authorized Share Capital = Issued Share capital + Un-issued Share Capital
(2) Issued Capital
Issued Capital is the amount of capital that a company offers for subscription to the public. It will always be less than or equal to authorized share capital, and can include shares that are offered as consideration in place of cash. Share capital not issued is known as unissued share capital (it may be issued at a later date)
(3) Subscribed Capital
Subscribed capital is the amount of issued share capital for which a company has received applications (i.e people take a subscription for those shares).
(4) Called-up Capital
The amount of the subscribed capital on which the company has requested payment is called called-up share capital. Suppose a company had 10,00,000 shares of Rs 10 (Rs 1 crore of subscribed share capital) The company chooses to call up only Rs 8 out of Rs 10 face value. The called up share capital will be 8 * 10,00,000 = Rs 80 lakhs. The remaining 20 lakhs worth of shares will be deemed “uncalled capital”.
Subscribed Capital = Called-up Capital + Uncalled Capital
(5) Reserve Capital: A company may reserve a portion of its uncalled capital to be called only in the event of winding up of the company. Such uncalled amount is called ‘Reserve Capital’ of the company. It is available only for the creditors on winding up of the company.
(6) Paid-up Capital
Paid up Capital is the amount of capital against which the company has actually received payment from shareholders. Any unpaid amount will be deemed “calls in arrears”
Paid-up capital = Called Up Capital - Calls-in-Arrears
Locating this Information
Information on Share Capital can be found in a section called Notes to Financial Statements in the Annual Report of a company. Typically in an Annual Report of a publicly traded company you will only see Authorized Capital and Issued, Subscribed and Fully Paid Up capital.
I intended this as a primer before talking about something more interesting to investors – splits, bonuses, buybacks etc. Hope it confused you less than it confused me when I first learned it.