Revision Notes On Limited Companies

Salient points:

Understand the various classes of share capital in a limited company:

Authorised, registered or nominal capital is the maximum amount of capital a company is allowed to raise from the public by the issue of share

Issued capital is that part of the authorized capital that is offered to the public for subscription

Subscribed capital is the amount of issued capital that is subscribed by the public

Called-up capital is the amount of issued an subscribed capital that is called up for payment

Uncalled capital is that pat of issued and subscribed capital that has not been called up for payment.

Paid-up capital is that part of called-up capital that has actually been paid

Calls in arrears is the portion of called-up capital that has not been paid.

Ordinary shares are those that receive dividends only after preference shares are paid their fixed rate of dividends

Preference shares earn a fixed rate of dividend and are entitled to profits before ordinary shares

Other terms commonly found in a limited company:

Deferred shares are also called founders’ shares. These shares are entitled to dividends only after preference and ordinary shares are paid a certain rate of dividend

Debentures are loans to the company and are raised upon the security of the assets of the company

Dividend is a share of profits made by the company

Interim dividends are dividends payable before the close of the financial period

Final dividends are dividends declared at the end of the financial period, only after profits are determined.

Understand the feature of a limited company:

  • Minimum two, no maximum for public limited company
  • Investment of cash by shareholders in exchange for shares(ordinary or preference)
  • Dividends are paid from profits to shareholders while unappropriated profits are kept as reserves.


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