Share capital facts for kids
A company's share capital is the money a business gets from people who buy a small piece of it. These pieces are called shares. When you buy shares, you become a part-owner of the company. This money helps the company start or grow. In the United States, share capital is often called capital stock. It also describes how many shares a company has and what types they are.
In simple terms, share capital is the total value of all the shares a company has sold. Imagine a company selling 100 shares, and each share has a "face value" of $1. The total share capital would be $100. This face value is also called the par value.
Sometimes, a company sells shares for more than their par value. For example, if a $1 par value share is sold for $5, the extra $4 is called a share premium. This premium also becomes part of the company's total share capital. So, the share capital usually includes both the par value and any premium paid on the shares. Most places do not let companies sell shares for less than their par value.
Legal Capital Explained
Legal capital is a special term used in many countries, especially in Europe. It refers to the total money and assets that shareholders first put into a company when they buy shares. It's like a minimum amount of money the company must keep.
Laws often require companies to maintain this legal capital. This means a company might not be allowed to pay out money to shareholders (like dividends) if it would make their total money fall below this legal capital amount. This rule helps protect the company and its creditors (people or businesses it owes money to).
More to Explore
In Spanish: Capital social para niños
