Issue of Shares Video Lecture | Accounting for CA Foundation

Ans. The process of issuing shares involves several steps. Firstly, the company needs to determine the number of shares to be issued and the price at which they will be offered. Then, the company needs to prepare a prospectus that provides all the necessary information about the shares and the company. After that, the company needs to file the prospectus with the appropriate regulatory authority. Once the prospectus is approved, the company can start accepting applications from potential investors. Finally, once the applications are received, the company needs to allot the shares to the applicants and collect the subscription money.

Ans. Equity shares and preference shares are two types of shares that a company can issue. The main difference between them lies in the rights and benefits they offer to the shareholders. Equity shares represent ownership in the company and provide voting rights to the shareholders. On the other hand, preference shares do not offer voting rights but provide a preferential right to receive dividends and repayment of capital in case of liquidation. Preference shares also have a fixed dividend rate, whereas the dividend on equity shares is not fixed and depends on the company's profits.

Ans. No, a company is not allowed to issue shares at a price lower than the face value. The face value of a share represents its nominal value and is the minimum amount that a shareholder can receive in case of liquidation. The Companies Act, which governs the issuance of shares, prohibits the issue of shares at a price lower than the face value to protect the interests of the shareholders. However, a company can issue shares at a price higher than the face value, which is known as a premium.

Ans. Authorized capital and issued capital are two terms used to describe the share capital of a company. Authorized capital refers to the maximum amount of capital that a company is authorized to raise by issuing shares. It is mentioned in the company's memorandum of association and can be increased or decreased by following the prescribed legal procedures. On the other hand, issued capital refers to the portion of authorized capital that has been actually issued to the shareholders. It represents the shares that are held by the shareholders and can be further divided into subscribed capital (shares for which applications have been received) and called-up capital (amount actually paid by the shareholders on the shares).

Ans. Issuing shares has several advantages for a company. Firstly, it provides a way to raise capital for the company's expansion, acquisitions, or other business activities. Secondly, it allows the company to diversify its ownership and bring in new shareholders who can contribute to the company's growth. Thirdly, issuing shares can enhance the company's credibility and reputation in the market, making it easier to attract investors and lenders. Additionally, shares provide a flexible source of financing as the company can determine the number of shares to be issued and the price at which they will be offered. Finally, issuing shares can also provide tax benefits to the company as dividends paid on shares are tax-deductible expenses.