Companies Act Section 2(86) Subscribed Capital

Subscribed Capital Section 2 (86)

1. Authorized Capital: 

Every company, at the time of incorporation, declares an Authorized Capital, which is the maximum amount of capital that it can issue to shareholders through the issuance of shares.

2. Subscribed Capital: 

Subscribed Capital refers to the portion of the Authorized Capital that shareholders agree to subscribe to or take up. 

When a company issues shares to shareholders and they agree to purchase those shares, the total value of those shares constitutes the Subscribed Capital.

3. Subscription Process: 

Shareholders subscribe to the shares by agreeing to purchase them at a specified price. 

Once subscribed, shareholders may pay for the shares either in full or in installments, as per the terms of the subscription agreement.

4. Implications: 

The Subscribed Capital reflects the actual commitment of shareholders towards the company. 

It is an important metric for determining the financial base of the company and its ability to raise capital through equity issuance.

Importance:

Capital Formation: 

Subscribed Capital represents the funds raised by a company through the issuance of shares, which can be used for business operations, investments, and expansions.  

Shareholder Commitment: 

Subscribing to shares signifies shareholders’ confidence in the company’s prospects and their willingness to invest in its growth.

Legal and Regulatory Compliance: 

Companies are required to maintain accurate records of Subscribed Capital and comply with regulatory requirements regarding the issuance and reporting of shares.