Shares Distinguished from Stock

A company that has any class of fully-paid shares in issue may, by resolution
in general meeting, convert them into stock; and may subsequently, by the same
procedure, re-convert stock into fully paid shares. Stockholders are members
having the rights conferred on them by the Articles.

Shares and stock are ordinarily transferable in the same manner, but
while fractions of a share cannot be transferred; stock may be transferred in
any amount from 1k upwards, subject to any restrictions imposed by the
company’s regulations.
Public companies invariably stipulate that stock is transferrable only
in multiples of a stated amount, example; 25k or #1. This use of term stock
must not be confused with the term loan stock, or debenture stock, which is a
form of loan capital.
Share capital
When a company is formed by its promoters, it has no assets and
liabilities. It’s first action may be to find members who will subscribe to the
share of the company in order to raise assets up to the amount stipulated in
the memorandum as authorized capital.
The amount is usually stated in following or similar manner:
“The share capital of the company is N 50m divided into 60 million Ordinary Shares of N 0.50k each; 30 million Preference Shares of N 0.20k each”.
It is not necessary that the whole of this nominal or authorized capital
shall be issued at the outset, or that the whole amount of each share shall be
fully paid, moreover, by resolution in general meeting.
The various terms used in connection with share capital are:
(1)       Authorized or nominal or register capital: This represents the amount
a company takes power in its memorandum, to issue.
(2)       Issued or subscribed capital: Is the total nominal value of the
shares allotted to members.
(3)       Called-up capital: Is the amount of the issued capital which has
actually been called up by the directors.
(4)       Paid-up capital: Is the amount paid up, or credited as paid, on the
issued share capital.
(5)       Uncalled capital: Is the total amount which has been called up on
the issued share capital.
(6)       Unissued capital: Is that portion of the authorized capital which
has not been allotted to members.
(7)       Reserve capital: Is that proportion of the issued share capital
which the company has resolved, by special resolution, can be called up only in
the event of the company being wound up.
Other terms used in connection with a company’s capital include the
following:
            Working capital: Is an accounting term used to describe the excess
of the current assets of a business over its current liabilities, and must not
be confused with any of the above terms used in connection with the share
capital of a company.
            Watered capital: Is a term used to denote
capital, the nominal amount of which has been inflated (example, by an issue of
bonus shares or by the payment of an excessive price for goodwill when a
company take over a private business) relative to the earning capital of the net
assets of the business.
            Loan capital: Is a term frequently
applied to debentures and other fixed loans. Such loans constitute liabilities
of the company to the persons lending the money, and do not form part of a
company’s share capital.
            The Issued or Subscribed Capital is unaffected
in the book by profits and losses, although the intrinsic value of the capital
as measured by the available assets may actually increase as the result of the
making of profits or diminishes the result of trading losses. This is in direct
opposition to the Capital Account (in which term the Current Account may be
included) of a sole trade or partnership, which fluctuates with profits and
losses, being increased by profits and decreased by losses.

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