CAPITAL: Capital refers to the amount invested in the company so that it can carry on its activities.

In a
company capital refers to "share capital". The capital clause in Memorandum of Association must state the
amount of capital with which company is registered giving details of number of shares and the type of shares
of the company. A company cannot issue share capital in excess of the limit specified in the Capital clause
without altering the capital clause of the MA.

1.Nominal, authorised or registered capital means the sum mentioned in the capital clause of Memorandum
of Association. It is the maximum amount which the company raises by issuing the shares and on which the
registration fee is paid. This limit is cannot be exceeded unless the Memorandum of Association is altered.

2.Issued capital means that part of the authorized capital which has been offered for subscription to members
and includes shares allotted to members for consideration in kind also.

3.Subscribed capital means that part of the issued capital at nominal or face value which has been subscribed
or taken up by purchaser of shares in the company and which has been allotted.

4.Called-up capital means the total amount of called up capital on the shares issued and subscribed by the
shareholders on capital account. I.e. if the face value of a share is Rs. 10/- but the company requires only Rs.
2/- at present, it may call only Rs. 2/- now and the balance Rs.8/- at a later date. Rs. 2/- is the called up share
capital and Rs. 8/- is the uncalled share capital.

5.Paid-up capital means the total amount of called up share capital which is actually paid to the company by
the members.

‘Stocks’ and ‘shares’ are basic terms that investors must understand before starting their stock market
journey. However, the terms are often used interchangeably. And many people don’t know that there is a
subtle difference between stock and share.

To some extent, it is true that they denote the same thing—an individual’s ownership in a public company.
However, while the term ‘stock’ refers to part-ownership in one or more companies, the term ‘share’ has a
more specific meaning. ‘Share’ refers to the unit of ownership in a single company.

WHAT IS A STOCK?

Stocks are financial securities that represent part-ownership in one or more companies. Upon buying a
company’s stock, you become a shareholder of that company. The stock certificate serves as proof of
ownership and mentions the number of stocks you hold. You can buy stocks of a single company or several
companies. There is no limit on the number of stocks you can hold in your portfolio.

In general, investors aim to buy the stocks of companies that are likely to increase in value. When such
appreciation takes place, the stockholder can sell the stocks and earn a profit. Apart from this, as a result of
their part-ownership, stockholders often receive a share of the company’s profits in the form of monthly,
quarterly, or annual dividend payments. Buying stocks is thus a lucrative way to make money. Plus, it reduces
the impact of market inflation over a period.
WHAT IS A SHARE?

A share is the smallest denomination of a company’s stock. So, each unit of stock is a share, and each share of
stock is equal to a piece of the company’s ownership.

Suppose a person X owns ‘100 shares of ABC Inc.’ Now, if ABC Inc. has one lakh shares, it means X owns 0.1%
of the company. Any person or entity with 10% ownership in a company, regardless of how many shares they
hold, is termed a principal stockholder.

People who buy shares may earn interest on the money invested along with dividends. But that is just part of
their motivation to invest in a company. Another reason is that their investment in the company pushes up the
company’s value, which in turn increases its share prices. Shareholders can then sell these shares for higher
than their purchase price to make money on their investment.

STOCK VS SHARE: KEY DIFFERENCES

Here are some essential points of difference between stock and share:

 Definition: ‘Stock’ represents the holder’s part-ownership in one or several companies. Meanwhile,
‘share’ refers to a single unit of ownership in a company. For example, if X has invested in stocks, it
could mean that X has a portfolio of shares across different companies. But if X has invested in shares,
the next questions should focus on ‘shares of which company’ or ‘how many shares’.

 Ownership: When an individual owns shares of several companies, you can say that they own stocks.
But if someone bought shares of a specific company, they only own shares.

 Denomination: Individuals who own stocks have the option to choose different stocks of different
values. Those who own shares in a specific company can, of course, own multiple shares. But the
shares will only be of the same or equal value.

 Paid-up value: Stocks are always fully paid-up in nature. However, shares could be either partly or
fully-paid up.

 Nominal value: This value is assigned to each share at the time the stock is issued. It is different from
the market value which varies based on demand for and supply of the shares.

 Kind of investment: Shares can refer to a large group of financial instruments known as securities.
They can include mutual funds, exchange-traded funds (ETFs), limited partnerships, real estate
investment trusts, etc. But stocks particularly refer to corporate equities and securities traded on a
stock exchange.

TYPES OF STOCK

There are mainly two kinds of stocks: common stock and preferred stock.

 Common stock: Common stock investors have the right to vote at shareholders’ meetings. They also
have a more directive stake in the company and receive company dividends at regular intervals.
  Preferred stock: Preferred stockholders are not given voting rights. However, they receive dividend
payments ahead of common stockholders. Investors in this category are given more priority over
common stockholders if the company goes bankrupt.

Both common and preferred stocks fall under the following categories:

 Growth stocks: Stocks of this category grow and earn at a faster rate than the usual market average.
As they rarely offer dividends, capital appreciation is what investors hope for. A start-up tech company
may offer this type of stocks.

 Income stocks: These stocks pay dividends consistently and help an investor to generate regular
income. An established utility company’s stocks would be an example of income stocks.

 Value stocks: These usually have a low price-to-earnings (PE) ratio. So, they are much cheaper than
those with a higher PE ratio. They could be either growth or income stocks. People buying value stocks
expect the stock price to rebound soon.

 Blue-chip stocks: These are the shares of big, well-known companies with a solid growth history. Such
stocks generally pay dividends. Blue-chip stocks are common among investors due to the reliability of
the company.

In addition, stocks can further be categorized by their market capitalization and size. There are large-cap, mid-
cap, and small-cap stocks. While shares of small companies are called microcap stocks, low-priced stocks are
known as penny stocks.

TYPE OF SHARES

Companies can issue various types of shares based on their rights and features. Two well-known types are
common shares and preference shares.

 Common shares: A common share is a basic type of share which could be classified into different
categories depending on voting rights. Take, for instance, the case of Class A and Class B shares. Class
A common shares may come with one voting right per share. But Class B shares might get 10 voting
rights per share.

 Preference shares: Preference shares are a less popular type of share that functions just like bonds.
They give guaranteed dividend payment to their holders. They also ensure a priority claim on the
company's assets if the company goes out of business.

Example of stock price fluctuation

Suppose you bought 100 shares of XYZ Ltd at Rs 85 (100*85=Rs 8,500) in the past week. The very next day, the
stock price declines to Rs 75. Now, the total value of your shares stands at Rs 7,500 (100*75) against the past
value of Rs 8,500. If you were to sell the shares, your total loss would be Rs 1,000. But a week later, the stock
price crosses your purchase price and stands at Rs 90. This brings the total value of your shares to Rs 9,000
(100*90). If you sold the shares now, you would pocket an overall profit of Rs 500.
IPO: Initial public offering or IPO is described as the process where a private company declares itself public by
selling off its stocks in the general public. Any company, irrespective of the number of years from its time of
establishment, its size and type of business it deals in can go ahead and get itself listed in the exchange to go
public.

BASIS FOR PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY

COMPARISON

Meaning Private Limited Company refers to the Public Limited Company implies a
company which is not listed on a stock company that is listed on a recognized
exchange and the shares are held stock exchange and whose shares are
privately by the members concerned. traded openly by the public.

Minimum number 2 7
of members

Maximum number 200, except in case of one person Unlimited

of members company

Minimum number 2 3
of directors

Articles of It must frame its own articles of It can frame its own articles of association
Association association. or adopt Table F.

Transfer of Shares The shares of a private company are not The shares of a public company are freely
freely transferable, as there are transferable, i.e. freely traded in an open
restrictions in Articles of Association. market called a stock exchange.

Public Issue of shares or debentures to the public It can invite the public to subscribe to its
Subscription is prohibited. shares or debentures.

Issue of prospectus Prohibited from issuing a prospectus. It can issue a prospectus or it can also opt
for private placement.

Minimum amount The company can allot shares, without The company cannot allot shares unless
of allotment obtaining minimum subscription. the minimum subscription stated in the
prospectus is obtained.
 BASIS FOR PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY
COMPARISON

Commencement of It can start a business just after receiving It requires a certificate of commencement
Business a certificate of incorporation. of business after it is incorporated.

Appointment of Two or more directors can be appointed One Director can be appointed by a single
Director by a single resolution. resolution.

Filing of Consent to Directors need not require the filing of Directors must file their consent to act as a
act as Director their consent to act as a director. director, within 30 days of appointment
with the Registrar.

Retirement of The directors are not required to retire 2/3rd of the total number of
Directors by by rotation. The directors can be directors must retire by rotation.
rotation permanent.

Place of Holding AGM can be held anywhere. AGM is held at the registered office or any
AGM other place where the registered office is
situated.

Statutory Meeting Optional Compulsory

Quorum 2 members, who are personally present at 5 members are required to be present in
the meeting, constitute a quorum, person when the number of members as on
irrespective of the number of members. the date of the meeting is 1000 or less.

15 members are required to present in

person when the number of members as on
the date of the meeting is more than 1000
but less than 5000.

30 members are required to present in

person when the number of members as on
the date of the meeting is more than 5000.

Exemptions Enjoys many privileges and exemptions. No such privileges and exemptions.
MEMBERS:

MEMORANDUM OF ASSOCIATION

ARTICLES OF ASSOCIATION

SHAREHOLDERS

PROSPECTUS

SHELF PROSPECTUS

RED-HERRING PROSPECTUS

NET WORTH

NET PROFIT

TURNOVER