Key Points

A joint stock company is an artificial person created by law, possessing a separate legal identity from its members (shareholders), perpetual succession, and a common seal for its official signature.

Share capital is categorized as: Authorised (maximum amount a company can issue), Issued (offered to the public), Subscribed (applied for by the public), Called-up (demanded by the company), and Paid-up (actually received from shareholders).

Reserve Capital is a part of uncalled capital to be called only on winding up. Capital Reserve is created from capital profits, such as profit on the reissue of forfeited shares.

A company can issue two types of shares: Equity shares (ordinary shares with voting rights) and Preference shares (which have preferential rights for dividend payment and capital repayment).

Shares are issued at par when the issue price equals face value. They are issued at a premium when the price is above face value, with the excess credited to the 'Securities Premium Account'.

The amount in the Securities Premium account can only be used for specific purposes like issuing fully paid bonus shares, writing off preliminary expenses, or for the buy-back of its own shares.

A company cannot allot shares unless it receives a minimum subscription, which is 90% of the issued amount according to SEBI guidelines. Failure to meet this requires refunding the entire application money.

Oversubscription is when applications received exceed the shares offered. In this case, a company may make a pro-rata allotment, allotting shares proportionately and adjusting excess application money towards allotment.

Calls-in-Arrears is the amount unpaid by shareholders on allotment or calls. Calls-in-Advance is the amount paid by shareholders before the company has made the official calls.

A company can issue shares for non-cash considerations, such as purchasing assets. The number of shares to be issued is calculated by dividing the purchase consideration by the issue price per share.

Forfeiture is the cancellation of shares due to non-payment of allotment or call money. When shares are forfeited, the Share Capital account is debited with the amount called-up on those shares.

Upon forfeiture, the amount already received from the defaulting shareholder is transferred to the 'Share Forfeiture Account'. This amount represents a gain to the company.

If the premium on forfeited shares has not been received, the Securities Premium account must be debited. If the premium has been received, the Securities Premium account is not affected by the forfeiture entry.

Forfeited shares can be reissued at par, premium, or a discount. The maximum discount on reissue is limited to the amount previously forfeited on those specific shares.

After the reissue of forfeited shares, any remaining balance in the Share Forfeiture account related to the reissued shares is a capital profit and must be transferred to the Capital Reserve account.