AHSEC - 12: Company Accounts - Accounting for Share Capital Important Notes for MAY' 2021 Exam | Revised and Reduced Syllabus

Class 12 Accountancy Notes

Unit – 5: Accounting for Share Capital 

Unit – 5: Accounting for Share Capital FOR 2021 EXAM

Q.1. Define the term Company. Mention its features.   2001, 2009

Ans: Company: A Company is an association of many persons who contribute money or money’s worth to a common stock and employs it for a common purpose. The common stock so contributed is denoted in terms of money and is called capital of the company. The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share.

According to Section 2 (20) of the Companies Act 2013 “Company means a company formed and registered under this Act."

Characteristics of a Company:

a)      Artificial Person: A company is an artificial person, which exists only in the eyes of law.

b)      Separate Legal entity: A company has a separate legal entity distinct from its members and is not affected by changes in its membership.

c)       Perpetual succession: A company has a continuous existence. Its existence does not affected by admission, retirement, death or insolvency of its members.

d)      Limited Liability: The liability of every member is limited to the amount he has agreed to pay to the company on the shares held by him.

e)      Transferability of Shares: The shares of a company are freely transferable by its members except in case of a private company.

Q.2. What do you mean by shares? What are its various types? Explain them.   1999, 2000, 2016, 2017, 2020

Ans: A share is the interest of a shareholder in a definite portion of the capital. It expresses a proprietary relationship between the company and the shareholder. A shareholder is the proportionate owner of the company.

Section 2(84) of the Companies Act’ 2013 defines a share as, “A share in the share capital of a company and includes stock except where a distinction between stock and shares is expressed or implied”.  

In the words of Farwell J. “A share is the interest of a shareholder in the company, measured by a sum of money, for the purpose of liability in the first place, and of interest the second, but also consisting of a series of mutual covenants entered into by all the shareholder inter se in accordance with the companies act”.

Types of shares:

According to section 43 of the Companies Act 2013, a company can issue only two types of shares:

(b) Equity shares; and

(a) Preference shares.                   2018, 2019

Equity Share: According to Sec. 43 (a) of the Companies Act 2013 "an equity share is share which is not preference share". An equity share does not carry any preferential right. Equity shares are entitled to dividend and repayment of capital after the claims of preference shares are satisfied. Equity shareholders control the affairs of the company and have right to all the profits after the preference dividend has been paid.

Features of equity shares:

a) Equity shareholders are the primary owners of a company.

b) Equity shareholders have voting rights and decision making powers.

c) Rate of dividend varies depending on the availability of surplus funds.

Preference Share: According to Sec. 43 (a) of the Companies Act 2013, a share that carries the following two preferential rights is called ‘Preference Share’:

(i) Preference shares have a right to receive dividend at a fixed rate before any dividend given to equity Shares.      

(ii) Preference shares have a right to get their capital returned, before the capital of equity shareholders is returned in case the company is going to wind up.

Features of preference shares:

a) Preference share holders are secondary owners of a company.

b) Preference share holders do not have voting rights except in special cases.

c) Rate of dividend is fixed in case of preference shares.

Preference shares are further subdivided into:                 2018

(a) On the basis of dividend: Cumulative and Non-cumulative preference shares

Cumulative preference shares are those which have the right to receive arrear of dividend before the dividend is paid to the equity shareholders.

Non-cumulative preference shares are those which do not have the right to receive arrear of dividends.

(b) On the basis of participation: Participating and non-Participating preference shares

Participating preference shares are those which have the rights to participate in remaining profits after payment of dividends to the equity shareholders.

Non-Participating preference shares are those which do not have the rights to participate in remaining profits after payment of dividends to the equity shareholders.

(c) On the basis of conversion: Convertible and Non-Convertible preference shares

Convertible preference shares are those which have the right to be converted into equity shares.

Non-convertible preference shares are those which do not have the right to be converted into equity shares.

(d) On the basis of redemption: Redeemable and Irredeemable preference shares

Redeemable preference shares are those which are redeemable after the expiry of specific period of time.

Irredeemable preference shares are those which are not redeemed by the company except in case of winding up.

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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Q.3. Distinguish between the following:

(a) Partnership Firm and Joint Stock Company

(b) Equity Shares and Preference Shares 1999, 2005, 2009, 2012

(c) Shares and Debentures 2002, 2004, 2006, 2008, 2010, 2012, 2014, 2016, 2017, 2018, 2020

(d) Shares and Stock

(e) Difference between Private company and Public company

Ans: (a) Difference between Partnership Firm and Joint Stock Company

Basis of Difference

Partnership

Joint Stock Company

Regulation

Partnership Firm is formed under Indian Partnership Act, 1932.

A Joint Stock Company is formed under Indian Companies Act, 2013.

Number of persons

 

Minimum number of partners is 2 and maximum 100 for a partnership firm. But in case of limited liability partnership there is no maximum limit.

Minimum numbers of members are 7 in case of a public company and there is no limit for maximum.  In a private limited company minimum number of members is 2 and 200 are maximum.

Liability

Liability of a Partnership firm is unlimited.

Liability of members is limited to extent of face value of shares held by him.

Auditing

Auditing of books is not compulsory.

Auditing of books is compulsory.

Mode of formation

Registration of a partnership firm is not compulsory under the Indian Partnership Act, 1932.

Registration of a company is compulsory under the Indian Companies Act, 2013.

(b)  Difference between Equity Shares and Preference Shares 

Basis of Difference

Preference Share

Equity Share

Right of Dividend

Preference shares are paid dividend before the Equity shares.

Equity shares are paid dividend out of the balance of profit available after the dividend paid to preference shareholders.

Rate of Dividend

Rate of dividend is fixed.

Rate of dividend is decided by the Board of Directors, year to year depending on profits.

Convertibility

Preference Shares may be converted into Equity shares, if the terms of issue provide so.

Equity shares are not convertible.

Voting Right

Preference shareholders do not carry the voting right. They can vote only in special circumstances.

Equity shareholders have voting rights in all circumstances.

Redemption of Share Capital

Preference shares may be redeemed.

A company may buy-back its equity shares.

(c)  Difference between Shares and Debentures

Basis of Difference

Shares

Debentures

Ownership

Shareholders are the owners of the Company.

Debenture holders are the Creditors of the Company.

Repayment

 

Normally, the amount of share is not returned during the life of the company.

Debentures are issued for a definite period.

Convertibility

Shares cannot be converted into debentures.

Debentures can be converted into shares.

Restrictions

Dividend is paid to the shareholders as an appropriation of profit.

Interest is paid to the debenture holders as a charge against profit.

Forfeiture

Shares can be forfeited for non-payment of allotment and call monies.

Debentures cannot be forfeited for non-payment of call monies.

(d)  Difference between Shares and Stocks

Basis of Difference

Shares

Stocks

a)           Paid-up value

Shares may be fully paid up or partly paid up.

Stocks are fully paid up.

b)           Numbering

Shares are serially numbered.

Stocks are not numbered.

c)            Registration

Shares are always registered.

Stock may be registered or unregistered.

(e) Difference between Public Limited Company and Private Limited Company

Basis of Difference

Private Company

Public Company

Number of persons

 

Minimum number of members is 2 and the maximum 200, excluding its present or past employee members.

Minimum number of members is 7 and there is no limit as to maximum numbers.

Transfer of Shares

Transfer of shares is generally restricted by the articles of association of a private limited company.

The shares of a public company are freely transferable.

Number of Directors

A Private Company must have at least two directors.

A Public Company must have at least three directors.

Name

The word ‘Private Limited’ must be used as a part of the name.

The word ‘Limited’ must be used as a part of the name.

Q.4. What is Share Capital? Mention its various categories.        2014, 2019

Ans: Share Capital: The capital of a joint stock company is divided into shares which are collectively called ‘Share Capital’. Share capital refers to the amount that a company can raise or has raised by the issue of shares. The share capital may be classified as below (Sec. 2 of the Companies Act, 2013):

a)      Nominal/Authorized/Registered Capital: This is the amount of the capital which is stated in Memorandum of Association and with which the company is registered. Nominal capital is the maximum amount which the company is authorised to raise from the public.                         2019, 2020

b)      Issued Capital: Issued capital is that part of the nominal capital, which is offered to the public for subscription. The balance of the nominal capital, which is not offered to the public for subscription, is called unissued capital.

c)       Subscribed Capital: Subscribed capital is that part of the issued capital, which is applied for by the public. The balance of the issued capital, which is not subscribed for by the public is called, unsubscribe capital.

d)      Called up Capital: This is the amount of the capital that the shareholders have been called to pay on the shares subscribed for by them. The amount of the subscribed capital, which is not called, is known as uncalled capital.

e)      Paid up Capital: This represents that part of the called up capital, which is actually received by the company. The amount of the called-up capital, which not paid by the shareholders, is called as unpaid capital or calls in arrears.

f)       Reserve Capital: A company may by special resolution determine that any portion of its share capital which has not been already called up shall not be capable of being called-up, except in the event of winding up of the company. Such type of share capital is known as reserve-capital.

Q.5. What are the various purposes for which Securities Premium can be utilised? 2003, 08, 12, 13, 2020

Ans: If Shares are issued at a price, which is more than the face value of shares, it is said that the shares have been issued at a premium. The Company Act, 2013 does not place any restriction on issue of shares at a premium but the amount received, as premium has to be placed in a separate account called Securities Premium Account.

Under Section 52 of the Company Act 2013, the amount of security premium may be used only for the following purposes:

a)      To write off the preliminary expenses of the company.

b)      To write off the expenses, commission or discount allowed on issued of shares or debentures of the company.

c)       To provide for the premium payable on redemption of redeemable preference shares or debentures of the company.

d)      To issue fully paid bonus shares to the shareholders of the company.

e)      In purchasing its own shares (buy back).

Q.6. Can a company issue shares at discount? If yes, under what conditions?  2003, 2014

Ans: As per sec. 53 of the Companies Act, 2013, issue of shares at a discounted price is prohibited. This prohibition applies to all companies, public or private. Any issue of share at a discounted price shall be void. But a company can issue sweat equity shares to its directors or employees as a reward to them for their contributions or conversion of debt into shares. Sweat equity shares are those which are issued by a company at a discounted price or for consideration other than cash.

According to Section 54 of company act 2013, a company is permitted to issue sweat equity shares provided the following conditions are satisfied:

a)      The issue of shares at a discount is authorised by a resolution passed by the company in its general meeting and sanctioned by the Central Government.

b)      The resolution must specify the maximum rate of discount at which the shares are to be issued but the rate of discount must not exceed 10 per cent of the nominal value of shares. The rate of discount can be more than 10 per cent if the Government is convinced that a higher rate is called for under special circumstances of a case.

c)       A company can issue sweat equity shares at any time after the registration of the company.

d)      The shares are of a class, which has already been issued.

e)      The shares are issued within two months from the date of sanction received from the Government.

Q. 7. What is Reserve Capital and Capital Reserve? Distinguish between them.      2017, 2018

Ans: Reserve Capital: Reserve capital is that part of the subscribed capital of the company which remains uncalled and called only in the event of winding up of a company. Reserve capital is created out of authorised capital. Special resolution should be passed at AGM to raise reserve capital.

Capital Reserve: It is that part of reserves which is created out of capital profits and normally not available for distribution as dividend. Profits on reissue of shares, premium of issue of shares and debentures are examples of such reserves. Difference between Reserve Capital and Capital Reserve are stated below:

 

Basis of Difference

Reserve Capital

Capital Reserve

Meaning

Reserve Capital is the part of uncalled capital, which shall not be called except in the event of winding up of the company.

It is that part of the reserves which is created out of capital profits and not free for distribution as dividend.

Creation

It is created out of uncalled capital.

It is created out of capital profits.

Optional/ Mandatory

It is not mandatory to create Reserve Capital.

Capital Reserve is mandatory to be created in case of profit on reissue of forfeited shares.

Disclosure

It is not to be disclosed in the Balance Sheet of the company.

Capital Reserve is to be shown in liability side of the balance sheet of the company under the heading of ’Reserve and Surplus.’

Utilisation

It is used only in the event of winding up of a company.

It is used to write off fictitious or capital losses.

Q.8. What Statutory and Statistical Books? Give examples of such books.                            2004, 2008, 2014

Ans: Statutory book: Such books are those which a limited company is under statutory obligation to maintain at its registered office with a view to safeguard the interests of shareholders and creditors. Main statutory books are:

1. Register of investments held and their names, 2. Register of charges, 3. Register of members, 4. Register of debenture holders, 5. Annual returns, 6. Minute books, 7. Register of contracts, 8. Register of directors.

Statistical Books: In order to keep a complete record of numerous details of certain transactions and activities of the company the following statistical books are usually maintained by joint stock companies in addition to statutory books. The keeping of such books are optional. The main books are:

1. Share application and allotment book, 2. Share calls book, 3. Share certificate book, 4. Debenture application and allotment book, 5. Debenture calls book, 6. Dividend book, 7. Debenture interest book, 8. Agenda book

Q.9. What do you mean by forfeiture of shares and re-issue of shares? How shares are forfeited and re-issued? 2012, 2015, 2016, 2018, 2019

Ans: Forfeiture of shares: Cancellation of shares due to non-payment of allotment and call money is called forfeiture of shares. A company has no inherent power to forfeit shares. The power to forfeit shares must be contained in the articles. Where a shareholder fails to pay the amount due on allotment or any call, the directors may, if so authorized by the articles, forfeit his shares. Shares can only be forfeited for non-payment of allotment and calls. An attempt to forfeit shares for other reasons is illegal. Thus where the shares are declared forfeited for the purpose of reliving a friend from liability, the forfeiture may be set aside.

Before the shares are forfeited the shareholder:

i) Must be served with a notice requiring him to pay the money due on the call together with interest;

ii) The notice shall specify a date, not being earlier than the expiry of 14 days from the date of service of notice, on or before which the payment is to be made and must also state that in the event of non-payment within that date will make the shares liable for forfeiture;

iii) There must be a proper resolution of the board;

iv) The power of forfeiture must be exercised bonafide and for the benefit of the company.

A person, whose shares have been forfeited, ceases to be a member of the company. But he shall remain liable to pay to the company all moneys which at the date of forfeiture were payable by him to the company in respect of the shares. The liability of such a person shall cease as and when the company receives payment in full in respect of the shares.

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ALSO READ (AHSEC ASSAM BOARD CLASS 12):

1. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE NOTES

2. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION (THEORY)

3. AHSEC CLASS 12 ACCOUNTANCY IMPORTANT QUESTION BANK (PRACTICAL)

4. AHSEC CLASS 12 ACCOUNTANCY PAST EXAM PAPERS (FROM 2012 TILL DATE)

5. AHSEC CLASS 12 ACCOUNTANCY SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

6. AHSEC CLASS 12 ACCOUNTANCY CHAPTERWISE MCQS

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Reissue of the forfeited shares:                               2018

            The directors of the company have the power to re-issue the forfeited shares on such terms as it think fit. Thus the forfeited shares can be reissued at par, or at premium or at discount. However, if the forfeited shares are reissued at discount, the amount of discount should not exceed the amount credited to the share forfeiture A/c. If the discount allowed on reissue is less than the forfeited amount there will be the surplus left in the share forfeited A/c. This surplus will be of the nature of capital profits so it will be transferred to the Capital Reserve A/c.

Procedure for reissue of forfeited shares

a)      The forfeited shares may then be disposed by sale or in any other manner as directed by the Board.  

b)      Short particulars of reissued shares will be advised to the stock exchange concerned.  

c)       To give effect to the sale of forfeited shares, the Board will authorise some person, preferably the director or Secretary, to transfer the shares sold to the purchaser thereof and to make a declaration in connection therewith.  

d)      The defaulting members will be asked to return the share certificates. If they fail to do so fresh certificates will be issued.  

e)      Public and stock exchange will be advised not to deal with the old certificates.  

f)       Any surplus arising out of sale after adjusting the amount due to the company in respect of the shares will be refunded to the member concerned.

Q.10. Briefly explain various types of company.

Ans: Kinds of Companies

A. Classification on the basis of liability

1. Companies with limited liability

(a)   Companies limited by guarantee [Sec.2(21)]- where the liability of the members of a company is limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wound up, the company is called a company limited b guarantee.

(b)    Companies limited by shares [Sec.2(22)]- where the liability of the members of a company is limited to the amount unpaid on the shares, such a company is known as a company limited by shares

2. Unlimited companies [Sec.2(92)] - A company without limited liability is known as an unlimited company. In case of such a company, every member is liable for the debts of the company.

B. Classification on the basis of number of members

1. Private company [Sec.2(68)] - A private company is normally what the Americans call a ‘close corporation’. According to Sec.2(68), a private company means a company which has a minimum paid-up capital as may be prescribed by its Articles:

a.       Restricts the right to transfer its shares, if any. The restriction is meant to preserve the private character of the company.

b.      Except in case of one person company, limits the number of its members to 200 not including its employee-members. Joint shareholders shall be counted as one member only.

c.       Prohibits any invitation to the public to subscribe for any securities. In other words, a private company shall not make a public issue of its securities.

A Private company may be:

a.       One Person company [Sec. 2(62)]: It means a company which has only one person as a member. All the provisions of a private company is also applicable to this company.

b.      Small Company [Sec. 2(85)]: A company shall be a small company only if it’s paid-up capital does not exceed Rs.50 lakhs or such higher amount as may be prescribed (not being more than Rs. 5 crores) and its turnover does not exceeds Rs. 2 crores or such higher amount as may be prescribed (not being more than Rs. 20 crores)

c.       Other that “One Person Company” and “Small Company”.

2. Public company [Sec. 2(71)] - A public company means a company which –

a. is not a private company

b. is a private company which is a subsidiary of a company which is not a private company.

c. has a minimum paid-up capital as may be prescribed by the articles.

C. Classification on the basis of control

1. Holding company-Section 2(46) - A company is known as the holding company of another company if is has control over that other company.

2. Subsidiary company-Section 2(87) - A company is known as a subsidiary of another company when control is exercised by the latter(called holding company) over the former called a subsidiary company.

A company is deemed to be a subsidiary of another company when:

a.       where the company controls the composition of Board of Directors of the subsidiary company

b.      where the company holds more than one- half the nominal value of equity share capital of another company

c.       where a company is subsidiary of another company, which is itself is subsidiary of the controlling company.

D. Classification on the basis of ownership

1. Foreign company [Sec 2(42)]- it means any company incorporated outside India which has an established place of business in India.

2. Government company [Sec 2(45)] - A Government company means any company in which not less than 51 % of the paid-up share capital is held by-

a.       the Central government

b.      any State government or governments

c.       partly by the Central government and partly by one or more State governments.

3. Non-government company: It means a company other than Government company.

E. Classification on the basis of listing of shares on the stock exchange

1. Listed Company [Sec. 2(52)]: It means a company which has any of its securities listed on any recognized stock exchange.

2. Unlisted Company: It means a company other than listed company.

Q.11. Explain the concept of issue of shares at par, at a premium and at a discounted price.  2017

Ans: Shares are divisions of the share capital of a company. There are two basic types of share capital based on the types of shares which can be issued by a company i.e. (a) preference shares and (b) equity shares. Shares of a company may be issued in any of the following three ways:

Ø  At Par

Ø  At premium

Ø  At discount

When shares are issued and payable in installments then first installment is called as “application money”. Second installment is called as “allotment money “. Third installment is called as “first call money” and last installment is called as “Final call Money”.

Issue of Shares at par: When shares are issued at the face value means when the issue price is equal to the face value then it is called as the issue of shares at par.

Issue of Shares at Premium: When shares are issued at a price higher than the face value then it is called as the issue of shares at premium. The excess of issue price over the face value is the amount of premium. The premium on issue of shares is treated as revenue profits.

Issue of shares at discounted price: When the shares are issued at a price lower than the face value, they are said to be issued at discount. Any company could not offer the shares at discount when it is a new company and it is a new class of shares even though of an old company. The discount on issue of shares is treated as a loss of capital nature.

Q. 12. Write short notes on:                                                                       2016

1. Right Issue: Rights Issue is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue.

2. Calls-in-Arrears: The amount which is not paid by shareholders when money is demanded by the company, such amount is known as ‘Calls-in-Arrears’. The maximum rate of interest to be provided on calls in arrear must not exceed 10% per annum.                        2018, 2019

3. Calls-in-Advance: Sometimes, it so happens that a shareholder may pay the entire amount on his shares even though the whole amount has not been called up. The amount received in advance of calls from such a shareholder should be credited to "calls in advance". The maximum rate of interest allowed on calls in advance is 12% per annum. 2018, 2020

4. Minimum Subscription: It means the minimum amount that, in the opinion of directors, must be raised to meet the needs of business operations of the company. AS per SEBI guidelines, the minimum subscription of capital cannot be less than 90% of the issued amount.       2017, 2019

5. Oversubscription and Pro-rata allotment: When the number of shares applied is more than the number of shares issued by a company, the issue of shares is said to be oversubscribed. The company cannot allot shares more than those offered for subscription. In case of over-subscription, there are three possibilities arise:

(a) Some applicants may not be allotted any shares. This is known as ‘rejection of applications’.

(b) Some applicants may be allotted less number of shares than they have applied for. This is known as partial or pro-rata allotment.

(c) Some applicants may be allotted the full number of shares they have applied for. This is known as full allotment.

In such a situation if shares are allotted in proportion of shares issued to shares applied, then such an allotment is called partial or prorata allotment. For example, if company allots shares to the applicants of 70,000 shares. It is a pro-rata allotment in the proportion of 5:7. In such cases, excess application money is transferred to allotment.                                  2018, 2019, 2020

6. Under subscription: When the number of shares applied is less than the number of shares issued by a company, the issue of shares is said to be under subscribed. In this case accounting entries are passed with the number of shares applied by the public.                     2018, 2020

7. Sweat Equity Shares: The expression ‘sweat equity shares’ means equity shares issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available right in the nature of intellectual property rights or value additions, by whatever name called. The companies will be allowed to issue Sweat Equity Shares if authorized by a resolution passed by a general meeting. A company can issue sweat equity share any time after registration.

Sweat equity shares are issued for the following purpose:

a) To provide technical knowhow to the company

b) To acquire patent rights

c) Value addition of companies

9. Preliminary Expenses: Expenses incurred to the formation of a company are called ‘Preliminary Expenses’. Preliminary expenses include the following: -

a)      Expenses incurred in order to get the company registered.

b)      Expenses incurred for the preparation, printing and issue of prospectus.

c)       Cost of preliminary books and Common Seal.

d)      Duty payable on Authorized Capital.

e)      Underwriting Commission etc.

Preliminary Expenses are to be written off out Securities Premium Account or it may be written off out of the Profit & Loss A/c gradually over some period. The balance left of preliminary expenses is to be shown in the asset side of the balance sheet of the company under the heading of ‘Miscellaneous Expenditure’.            2017

10. Bonus shares: Where company have large amount of undistributed profit and these profits are capitalised by converting them into shares and issued free of charge to the existing shareholders, such shares are known as bonus shares.

12. Employees stock option plan (ESOP): Employees stock option plan (ESOP) is an employee benefit scheme under which the company encourages employees to acquire shares in the company. Under such scheme, shares are issued to the employees normally at a discounted price.  The main purpose of this plan is:

a)      To motivate the employees to work together for the common goal of company’s growth.

b)      To give financial benefit to the employees.

c)       To create a feeling of responsibility amongst the employees.

d)      To give better job security and job satisfaction.

13. Methods of raising capital:

1. Initial Public Offer (IPO): In a capital market, company can borrow funds from primary market by way of initial public offer. It is process by which a company sale it securities to the general public for the first time.

2. Rights Issue: In capital market, rights issue means selling securities in primary market by issuing shares to existing shareholders.

3. Private Placement: In this method the capital issue is sold directly to institutional investors like insurance companies, banks, mutual funds etc.

4. Offers for Sale: In this case, the company sells the entire issue of shares or debentures to a merchant banker at an agreed price, which is normally below the par value.

5. Venture Capital: It is an important source of funds for new technology based industries where the venture capital firm invests funds in exchange of equity in the startup.