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Introduction - Issue of Shares | Crash Course of Accountancy - Class 12 - Commerce PDF Download

Definition of a Company:
"A Company is an artificial person created by law, having separate entity with a perpetual succession and a common seal".
Characteristics of a Company:
(1) Separate Legal Entity.
(2) Perpetual Existence.
(3) Limited Liability.

(4) Common Seal.
(5) Transferability of Shares.

(6) Separation of Management from Ownership.
Kinds of a Company:
Companies registered under the Companies Act, 2013, may be classified as below:
Introduction - Issue of Shares | Crash Course of Accountancy - Class 12 - Commerce

Unlimited Company:
• Unlimited Company is a company where there is no limit on the liability of its members.
• It means, when a company suffers loss and the company's property is not sufficient to payoff its debts, the private property of its members will be used to meet the claims of creditors.
Company Limited by Guarantee:
• In case of such a company, the liability of the members is limited to the extent of the guarantee given by them in the event of the winding up of the company.
• The liability of its member will arise only in the event of winding up of the company.
Company Limited by Shares:
• In case of such a company the liability of the members is strictly limited to the extent of the nominal value of shares held by each of them.
• If a member has already paid the full amount of the shares, he will not be liable to pay any amount.
• Such companies may be sub-divided into private, public and one person companies:
Private Company:
• As per Section 2 (68) of Companies Act, 2013, a private company is one which has a minimum paid-up share capital of Rs 1,00,000 or such higher paid-up capital as may be prescribed by Companies Act, and by its Articles of Association.

• The name of every private company must end with the words private limited.
Public Company:
• As per Section 2 (71) of Companies Act, 2013, a public company means a company which is not a private company and has a minimum paid-up share capital of Rs.5,00,000 or such higher paid-up share capital as may be prescribed by the Companies Act.

s.no.
Basis
Private co.
Public co.
1Number of members
Minimum number of members is 2, and the maximum, exclusive of past and present employees is 200.
Minimum number of members is 7 and there is no limit to, maximum number.
2Paid-up Capital
It should have minimum paid-up capital as prescribed by the Companies Act, which is Rs. 1,00,000 at present.
It should also have minimum paid-up capital as prescribed by the Companies Act, which is Rs.5,00,000 at present.
3Invitation to the public
It cannot invite the public to subscribe to its shares.
It can invite the public to subscribe to its shares.
4Transfer of Shares
There is restriction on the transfer of its shares.
There is no restriction on transfer of its shares.


One Person Company OR OPC:
Meaning: Companies Act 2013 introduces a new type of entity to the existing list i.e., apart from forming a public or private limited company, the Act enables the formation of a new entity ‘One Person Company’ (OPC). An OPC means a private limited company with only one person as its member [Section 2 (62)].
Member of OPC:
Only natural person who is citizen of India can be a member of OPC.
Minimum Paid-up Capital:
Its minimum paid-up Capital should be Rs.1,00,000.
Purpose:
It can be formed for business as well as charitable purpose.
Number of Directors:
An OPC can have minimum one and maximum fifteen directors.
Conversion:
An OPC cannot convert itself into public or private company unless a period of 2 years has expired from the date of its incorporation and conversion is mandatory when the paid-up share capital is increased beyond Rs.50 Lakh or its average annual turnover during the relevant period exceeds Rs.2 Crore.
Benefits:
(i) OPC is not required to include Cash Flow Statement in its financial statements.
(ii) The provisions relating to calling of AGM, Notice for General Meeting, Quorum for meetings, Proxies etc. shall not apply to OPC.

The document Introduction - Issue of Shares | Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
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FAQs on Introduction - Issue of Shares - Crash Course of Accountancy - Class 12 - Commerce

1. What is the process of issuing shares in commerce?
Ans. Issuing shares in commerce involves several steps. Firstly, a company must decide on the number of shares it wants to issue and their nominal value. The company then prepares a prospectus, which contains information about the company, its financials, and the purpose of issuing shares. This prospectus is then filed with the relevant regulatory authority. Once approved, the company can proceed with the allocation of shares to interested investors. The shares are typically offered through an initial public offering (IPO) or a private placement. Investors can then subscribe to the shares by submitting their applications, and once the subscription period is over, the company determines the final allocation of shares and issues them to the investors.
2. What are the benefits of issuing shares in commerce?
Ans. Issuing shares in commerce offers various benefits. Firstly, it provides a source of capital for the company, allowing it to fund its growth plans, invest in new projects, or repay debts. Secondly, issuing shares can help improve the company's overall financial position by reducing its leverage and increasing its equity base. Additionally, issuing shares can enhance the company's visibility and reputation in the market, attracting more investors and potentially driving up the stock price. Moreover, by issuing shares, the company can also distribute its ownership among a larger number of shareholders, which can lead to a wider distribution of risk and increased corporate governance.
3. What are the different types of shares that can be issued in commerce?
Ans. Companies can issue various types of shares in commerce. Common shares, also known as ordinary shares, are the most basic type of shares that provide ownership rights and voting power to the shareholders. Preference shares, on the other hand, offer certain preferential rights to the shareholders, such as a fixed dividend or priority in receiving assets in case of liquidation. Additionally, companies can also issue different classes of shares, such as Class A and Class B shares, which may have different voting rights or dividend preferences. The specific types of shares that can be issued depend on the company's articles of association and the applicable laws and regulations.
4. How does issuing shares affect the ownership and control of a company in commerce?
Ans. Issuing shares in commerce can impact the ownership and control of a company. When new shares are issued, the ownership of the company is diluted as the existing shareholders' percentage ownership decreases. This means that the new shareholders will have a proportionate share in the company's ownership. Additionally, issuing shares can also affect the control of the company as the voting power may be distributed among a larger number of shareholders. This can lead to changes in the decision-making process and potentially impact the control exercised by the existing shareholders or management. However, the extent of these effects depends on the proportion of shares issued and the rights attached to them.
5. What are the regulatory requirements for issuing shares in commerce?
Ans. Issuing shares in commerce is subject to various regulatory requirements. Companies must comply with the laws and regulations of the jurisdiction in which they operate. They are typically required to file a prospectus or offering memorandum with the relevant regulatory authority, providing detailed information about the company and the shares being offered. The prospectus must meet certain disclosure requirements to ensure that potential investors have access to accurate and complete information. Additionally, companies may also need to obtain approvals or permits from regulatory bodies before proceeding with the share issuance. These requirements aim to protect investors and maintain the integrity of the capital markets.
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