how companies raises capital and types capital
RAISING OF CAPITAL
The methods by which a company raises capital or issue its shares….. read my post on types of shares here.….. are:
- By prospectus: A prospectus, giving particulars of the company and its business, is published with application form. Shares are allotted to those who apply.
- By offer for sale: The whole issue of shares is allotted to an issuing house (merchant bank, finance house) which offers them to the public by means of a document known as “offer for sale.”
- By placing: This is the method of issuing securities through an intermediary such as a firm of stock brokers. The intermediary will endeavour to place the issue among its institutional investors.
- By a right issue: When a company is established, it may raise further capital by offering the shares concerned to existing members on favourable terms.
- By introduction: The company concerned can apply to the stock exchange for sales of its shares. There will be an offer to the public of a new issue of shares through the stock exchange.
TYPES OF CAPITAL FOR COMPANIES
There are different types of capital available to a company. These include:
- Issued capital: This represents the part of the authorized capital given out to members of the public for subscription. It is after the issued capital is fully subscribed that it can now be referred to as subscribed capital.
- Reserved capital: This represents the portion of the capital not called up, which the directors have assumed to be incapable of being called up any time. The uncalled-up capital is a liability to the company and is set aside for future expansion.
- Authorized capital: This is also called nominal or registered capital. This is the highest amount of capital stipulated in the memorandum of association considered as enough to set up and run a company.
- Called-up capital: This is the portion of the capital which the management considers good enough to be called up on the issued shares.
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