• Is not a private company.
• Has a minimum of 7 members and no limit on the maximum number of members.
• Can invite the public to subscribe to its shares or debentures.
• Has no restriction on the transfer of its shares.

• Restricts the right to transfer its shares.
• Limits the number of its members to 200 (excluding employees).
• Prohibits any invitation to the public to subscribe for any securities of the company.

• Issuing fully paid bonus shares to members.
• Writing off preliminary expenses of the company.
• Writing off commission paid or discount allowed on issue of securities.
• Providing for the premium payable on redemption of preference shares or debentures.
• Buy-back of own shares.

Definition: According to Section 2(20) of the Companies Act, 2013, a company means “a company incorporated under this Act or under any previous company law.” It is an artificial person created by law, having a separate entity, with a perpetual succession and a common seal.

Characteristics:

• Incorporated Association: It must be registered/incorporated under the Companies Act.
• Separate Legal Entity: It has a distinct legal personality separate from its members (owners). It can own property and sue/be sued in its own name.
• Perpetual Succession: Members may come and go, but the company goes on forever. Death or insolvency of members does not affect its existence.
• Limited Liability: The liability of members is usually limited to the unpaid amount on the shares held by them.
• Common Seal: Being an artificial person, it cannot sign. The common seal (if any) acts as its official signature.
• Transferability of Shares: Shares of a public company are freely transferable.

1. Authorized (Nominal) Capital: The maximum amount of capital a company is authorized to issue as per its Memorandum of Association.
2. Issued Capital: The part of authorized capital that is actually offered to the public for subscription.
3. Subscribed Capital: The part of issued capital that has been subscribed for by the public. It is further divided into:
   • Subscribed and Fully Paid-up: When the company has called up the entire face value and the shareholder has paid it.
   • Subscribed but Not Fully Paid-up: When the company has not called up the full amount OR the shareholder has failed to pay the called amount.
4. Called-up Capital: The portion of the face value that the company has asked shareholders to pay.
5. Paid-up Capital: The actual amount received from shareholders.

Share: A share is a unit of ownership that represents a portion of the company’s capital. Section 2(84) defines it as “a share in the share capital of a company and includes stock.”

Types of Shares (Section 43):

• Preference Shares: Shares that carry two preferential rights:
  • Right to receive dividend at a fixed rate before equity shareholders.
  • Right to return of capital before equity shareholders in case of winding up.
• Equity Shares: Shares which are not preference shares. They carry voting rights and receive dividends only after preference shareholders are paid. They bear the primary risk and enjoy the residual profits.

• Rejection: Reject some applications totally and refund their application money.
• Pro-rata Allotment: Allot shares proportionately to all applicants. The excess application money is adjusted towards allotment and calls.
• Combination: A mix of the above two methods—rejecting some, giving full allotment to some, and pro-rata to others.

Types:

• Cumulative vs Non-Cumulative: Cumulative shares accumulate unpaid dividends as arrears; Non-cumulative do not.
• Participating vs Non-Participating: Participating shares get a share in surplus profit after equity dividend; Non-participating get only fixed dividend.
• Redeemable vs Irredeemable: Redeemable shares are repaid after a fixed period; Irredeemable are not (prohibited in India now).
• Convertible vs Non-Convertible: Convertible shares can be converted into equity shares; Non-convertible cannot.

• Calls in Arrears: It is the amount called up by the company but not paid by the shareholder.
  • The company can charge interest on this amount.
  • As per Table F of Companies Act 2013, maximum interest rate is 10% p.a.
• Calls in Advance: It is the amount paid by a shareholder before the company has called for it.
  • The company must pay interest on this amount.
  • As per Table F, maximum interest rate is 12% p.a.
  • This amount is shown as a liability but does not earn dividends.

• Over-subscription: When applications received are more than shares offered.
  Treatment: Handled via rejection, pro-rata allotment, or a mix. Excess money is refunded or adjusted.
• Under-subscription: When applications received are less than shares offered.
  Treatment: All applications are accepted (provided Minimum Subscription of 90% is reached). If minimum subscription is not met, the issue fails and money is refunded.

1. Issuing fully paid bonus shares to members.
2. Writing off preliminary expenses.
3. Writing off the expenses of, or the commission paid or discount allowed on, any issue of securities or debentures.
4. Providing for the premium payable on the redemption of any redeemable preference shares or debentures.
5. Buy-back of its own shares.

General Prohibition: According to Section 53 of the Companies Act, 2013, a company is prohibited from issuing shares at a discount. Any issue of shares at a discount is void.

Exception (Sweat Equity): The only exception is provided under Section 54, which allows a company to issue Sweat Equity Shares to its employees or directors at a discount for providing know-how or making available rights in the nature of intellectual property.

Definition: Forfeiture means the cancellation of shares due to the non-payment of allotment or call money. The name of the shareholder is removed from the register, and the amount already paid by them is forfeited by the company.

Accounting Treatment (Journal Entry):

Note: If Calls in Arrears account is not maintained, we credit Share Allotment/Share Call accounts individually.