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Share Capital Basics: Glossary of Terms
- Startup Valuation
- Business Valuation
- IBBI Registered Valuer
- ESOP Valuation
- Valuation Under Companies Act
- Pitch Deck & Financial Modeling Services
- AIF Valuation
- Valuation Under Income Tax Act
- Valuation Under FEMA/FDI
- Valuation Under SEBI
- Valuation Under IBC
- Other Services
- Complex Financial Instruments Valuation
- Purchase Price Allocation (PPA) Services
Share capital is the first thing a founder, investor or lender reads about a company and the last thing most glossaries explain well. This cluster covers the forty-one terms that describe how an Indian company's capital is created, divided, recorded and changed: the kinds of share under section 43 of the Companies Act, 2013; the four capital figures in sections 2(8), 2(50), 2(86) and 2(64); the premium and reserve rules in sections 52 and 63; the alteration, reduction and buyback routes in sections 61, 66 and 68; and the transfer, transmission and demat rules in sections 56 and 72 and the Companies (Prospectus and Allotment of Securities) Rules, 2014. Each standalone page opens with a self-contained definition, works an INR example, separates the Indian provision from the US equivalent, and ends with how a Registered Valuer treats the term. The short definitions below cover the terms that need a paragraph rather than a page. The standalone pages follow one illustrative Pune software company through a round, a bonus, a split, a transfer and a buyback, so the figures agree from page to page.
Table of contents
ShowHide- Share
- Shareholder
- Par Value
- Securities Premium Account
- Issued Capital
- Subscribed Capital
- Called-up Capital
- Partly Paid Shares
- Share Certificate
- Folio Number
- ISIN
- Physical Shares
- Public Shareholding
- Consolidation of Shares
- Forfeiture of Shares
- Lien on Shares
- Share Transfer Deed
- Book Value per Share
- Market Value per Share
- Nominal Value
- Related Valuation Clusters
A share is a unit of the share capital of a company, and includes stock, as defined in section 2(84) of the Companies Act, 2013. It is a bundle of rights against the company, chiefly to dividend, to vote and to a share of surplus on winding up, measured by a fixed face value.
A share is movable property, transferable in the manner the articles provide, and under section 44 of the Companies Act, 2013 it is the holder's personal estate. It is not a claim on any specific asset of the company; a shareholder owns a fraction of the company, not a fraction of its factory. Shares come in two kinds under section 43: equity and preference. A private limited company with 1,50,000 shares of INR 10 has share capital of INR 15,00,000, and each share represents one 1,50,000th of the equity.
A shareholder is a person who holds shares in a company and whose name is entered in its register of members, or who holds shares in dematerialised form as a beneficial owner. The Companies Act, 2013 uses the term "member", defined in section 2(55), for the same person.
Shareholding brings rights and duties in proportion to the shares held: a vote under section 47, dividend when declared, a pre-emptive right in a rights issue under section 62(1)(a), and liability limited to any amount unpaid on the shares. The register, not the share certificate, is the proof of membership; a buyer becomes a shareholder only when the transfer is registered. In a private limited company the number of members is capped at 200 under section 2(68), excluding present and past employees. Founders, investors holding equity or preference shares, and ESOP holders who have exercised their options are all shareholders; option holders who have not exercised are not.
Par Value
Par value is the fixed amount per share stated in a company's constitutional document, below which the share cannot be issued. In India it is the same number as face value or nominal value under the Companies Act, 2013; in the United States it is the term used in a Delaware certificate of incorporation.
The phrase matters for an Indian reader mainly in a cross-border setting. A Delaware parent will show common stock with a par value of USD 0.0001, which is a nominal figure chosen to keep franchise tax low, while its Indian subsidiary shows equity shares of INR 10. Both are the same concept: the denomination that goes to share capital, with everything above it going to premium (securities premium in India, additional paid-in capital in the US). US law also allows no-par stock; Indian law does not, since section 4(1)(e) requires shares of a fixed amount. When reading a US cap table, treat par value exactly as face value: a legal floor, not a measure of worth.
The securities premium account is the ledger account in which a company records every amount received on issue of shares or other securities above face value, as required by section 52(1) of the Companies Act, 2013. It appears under Other Equity in the balance sheet and is not available for dividend.
The account is a reserve with restricted uses. Section 52(2) permits it to be applied towards fully paid bonus shares, writing off preliminary expenses, writing off the expenses, commission or discount on an issue, the premium on redemption of preference shares or debentures, and a buyback under section 68; a company following Ind AS has the shorter list in section 52(3). Any other reduction follows the capital reduction route under section 66. When a Pune company issues 50,000 shares of INR 10 at INR 1,200, INR 5,95,00,000 is credited here and INR 5,00,000 to share capital. For income-tax purposes the balance is treated as a reserve, so it is not deducted as a liability when computing fair market value under Rule 57 of the Income-tax Rules, 2026.
Issued Capital
Issued capital is the part of a company's authorised capital that it has offered for subscription, measured at face value, as defined in section 2(50) of the Companies Act, 2013. It can never exceed authorised capital, and subscribed and paid-up capital sit within it.
A company issues capital each time it allots shares: to subscribers at incorporation, in a funding round, a rights issue, a bonus issue or an ESOP exercise. In the Pune SaaS example used across this cluster, authorised capital of INR 25,00,000 stands against issued capital of INR 15,00,000 (1,50,000 shares of INR 10), leaving INR 10,00,000 of headroom. Issued capital counts only face value: the INR 5,95,00,000 premium received in the same round sits in the securities premium account and does not form part of it. In a private limited company that allots shares fully paid, issued, subscribed and paid-up capital are the same number; they diverge only where shares are offered but not fully taken, or taken but not fully paid.
Subscribed Capital
Subscribed capital is the part of issued capital that members have agreed to take and pay for, at face value, as defined in section 2(86) of the Companies Act, 2013. It equals issued capital when every share offered is taken, and is lower when an offer is only partly accepted.
The figure matters in a public offer or a rights issue, where shareholders may decline their entitlement. If a company offers 1,00,000 rights shares of INR 10 and holders apply for 80,000, issued capital for the offer is INR 10,00,000 but subscribed capital is INR 8,00,000, and the directors allot only the subscribed shares unless the articles let them place the balance. In a private limited company raising money by private placement under section 42, the investor commits to a fixed number of shares before allotment, so subscribed capital equals issued capital on the day of allotment. Schedule III requires the balance sheet notes to show subscribed capital separately from issued and paid-up, which is why all three appear even when the numbers are identical.
Called-up Capital
Called-up capital is the part of subscribed capital that the company has demanded from shareholders by making calls, as defined in section 2(15) of the Companies Act, 2013. Where shares are issued fully paid, called-up capital equals subscribed capital; where shares are partly paid, it is the amount called so far.
A company may allot shares and collect the face value in instalments: an amount on application, an amount on allotment and the rest in one or more calls. Called-up capital is the running total the company has asked for; paid-up capital is the part of that total actually received. If a Pune company allots 1,00,000 shares of INR 10 with INR 6 called and INR 4 still to be called, called-up capital is INR 6,00,000 and uncalled capital INR 4,00,000. Voting rights under section 47 and dividend under Table F are computed on paid-up amounts, so a holder in arrears on a call carries less weight than one who has paid in full. Calls follow the articles, and Table F allows a call only on at least fourteen days' notice.
Partly paid shares are shares on which the holder has paid less than the full face value, the balance remaining payable on future calls by the company. The Companies Act, 2013 permits them; the unpaid amount is the shareholder's only liability beyond the price already paid, under the limited liability principle in section 2(22).
Partly paid shares are rare in private limited companies, which almost always issue fully paid shares against immediate payment, but they appear in rights issues by listed companies and in some infrastructure financing. The amount unpaid affects everything measured on paid-up value: voting under section 47, dividend under Table F, and the Rule 57 fair market value computation, which multiplies net assets by the paid-up value of the share being valued. Section 61(1)(d) requires that a sub-division keep the same ratio of paid to unpaid on every new share. A holder who fails to pay a call risks forfeiture under the articles, and the company holds a lien on the shares for the unpaid amount. A partly paid share cannot be converted into stock until fully paid, under section 61(1)(c).
A share certificate is the document a company issues in Form SH-1, under section 46 of the Companies Act, 2013 and Rule 5 of the Companies (Share Capital and Debentures) Rules, 2014, certifying that the named person holds a stated number of shares of a stated face value. It is prima facie evidence of title.
Section 56(4) sets the deadlines: within two months of incorporation for subscribers, within two months of allotment for new shares, and within one month of receipt of a transfer instrument for transfers. Each certificate carries a distinctive number, the folio number of the holder, the distinctive numbers of the shares and the amount paid up. Stamp duty on issue is payable under the Indian Stamp Act, 1899 or the applicable State Act. Certificates are becoming historical: since Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 took effect, private companies other than small companies must issue securities only in dematerialised form, so a new certificate is now issued mainly by small companies, with the depository statement serving as evidence for everyone else.
Folio Number
A folio number is the unique account number a company assigns to each shareholder in its register of members for shares held in physical form. All certificates and transactions of that holder are recorded against it, in the way a bank account number identifies a depositor.
The folio appears on every share certificate, dividend warrant and notice sent to a physical holder, and the register entry under section 88 of the Companies Act, 2013 is organised by folio. Joint holders share one folio. When a holder dematerialises shares, the folio is closed for those shares and the holding moves to a demat account identified by a client ID with the depository participant, so a company that has moved fully to demat under Rule 9B keeps folios only for residual physical holders. In due diligence a valuer or auditor traces a historical transfer by folio number and certificate number on the register, then matches it to the SH-4 transfer deed. A mismatch between the folio on the certificate and the register is a title defect that must be cured before the shares can be valued or sold.
ISIN
An ISIN, or International Securities Identification Number, is a twelve-character code that uniquely identifies one class of security of one issuer for trading and settlement in dematerialised form. In India the codes for equity shares begin with "INE" and are allotted by the depositories, NSDL and CDSL.
A company cannot dematerialise a security until it has an ISIN for that class. Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 therefore requires every private company other than a small company to obtain an ISIN for each type of security it has issued, through a registrar and transfer agent and a depository, before it can allot new shares in demat form. Equity shares, each series of preference shares, and each series of debentures carry separate ISINs, because they are different securities with different rights. A partly paid share also takes a different ISIN from a fully paid one. For a valuer, the ISIN confirms which class is being valued; for an investor, the ISIN on the depository statement is the proof that the shares credited are the class the share subscription agreement promised.
Physical shares are shares held in paper form, evidenced by a share certificate and recorded by folio number in the company's register of members, rather than as an electronic credit in a depository account. The opposite is dematerialised or demat shares.
Physical holding is being phased out. Listed companies may not transfer shares in physical form, and under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014 a private company that is not a small company (paid-up capital above INR 10 crore or turnover above INR 100 crore from 1 December 2025) must enable dematerialisation and issue all new securities only in demat form. Small companies may still hold and issue physical shares. A physical transfer requires a stamped and executed Form SH-4 delivered within sixty days under section 56(1), with stamp duty at 0.015 per cent of the consideration from 1 July 2020, and the company issues a fresh certificate within one month. Physical holdings are a frequent source of title disputes, lost certificates and unclaimed dividends, which is why investors and acquirers usually insist on demat before closing.
Register of Members
The register of members is the statutory record every company must keep under section 88 of the Companies Act, 2013, in Form MGT-1, listing each member's name, address, shares held, amount paid, and the dates of becoming and ceasing to be a member. Entry in the register is what makes a person a member.
The register is kept at the registered office under Rule 3 of the Companies (Management and Administration) Rules, 2014, and is open to inspection by members. For shares in demat form, the record of beneficial owners maintained by the depository is deemed to be the register for those shares under section 88(3). Every transfer, transmission, allotment, forfeiture and buyback is written up here, so the register and the cap table should always agree; where they do not, the register prevails in law. Auditors verify share capital against it, valuers use it to confirm the number of shares and the classes in issue on the valuation date, and acquirers inspect it in due diligence to confirm that the sellers actually own what they are selling.
Public shareholding is the portion of a listed company's equity held by persons other than its promoters, promoter group and certain excluded holders such as the company's own trusts. Rule 19A of the Securities Contracts (Regulation) Rules, 1957 requires every listed company to maintain public shareholding of at least 25 per cent.
The rule exists so that enough shares are in outside hands for a fair market price to form. A company that falls below 25 per cent, for example after a buyback or a promoter acquisition, must restore the level within twelve months in a manner SEBI specifies, such as an offer for sale or a rights issue to the public. A newly listed company may be given a longer window to reach 25 per cent. Public shareholding is reported quarterly in the shareholding pattern filed under the SEBI Listing Regulations, and the figure is the starting point for free float, which further removes locked-in and strategic holdings. The concept has no equivalent in a private limited company, where shares are held by a closed group and there is no public at all.
Consolidation of shares is the combination of several shares of a smaller face value into fewer shares of a larger face value, under section 61(1)(b) of the Companies Act, 2013. Ten shares of INR 1 become one share of INR 10; share capital and each holder's percentage are unchanged.
Consolidation is the mirror image of a stock split, used to reduce an unwieldy share count or lift a low per-share price before a listing. The resolution is passed in general meeting where the articles authorise it, and section 64 requires Form SH-7 within 30 days. Where a consolidation would change the voting percentage of shareholders, for example because fractional entitlements are cancelled or paid out in cash, section 61(1)(b) requires the approval of the Tribunal. Fractions are the practical difficulty: a holder of 15 shares of INR 1 consolidated 10:1 gets one share of INR 10 and a fraction, which the company usually sells and pays out. In a valuation the per-share figure is restated for the new face value; total equity value is unaffected.
Forfeiture of shares is the cancellation by a company of a member's shares for non-payment of a call or instalment, under the authority of its articles of association. The member ceases to hold the shares and loses the amount already paid, while the company may reissue the forfeited shares.
The Companies Act, 2013 does not itself provide for forfeiture; the power comes from the articles, and Table F in Schedule I sets the model procedure. The directors serve a notice demanding payment with interest within at least fourteen days, warning of forfeiture, and then pass a resolution forfeiting the shares. The former holder remains liable for the unpaid call unless the articles say otherwise. Forfeited shares may be reissued, even at a discount, provided the total received on the share is not less than its face value, because section 53 bars an issue at a discount only in respect of the original issue. On reissue, any surplus over the amount unpaid goes to capital reserve. Forfeiture reduces paid-up capital until reissue, and the register of members is updated on both dates.
A lien on shares is the company's right, granted by its articles, to hold a member's shares as security for money the member owes the company, usually unpaid calls, and to sell the shares to recover the debt if it remains unpaid.
Table F in Schedule I of the Companies Act, 2013 gives the model clause: the company has a first and paramount lien on every partly paid share for all money called or payable at a fixed time, and the lien extends to dividends on those shares. The directors may declare a share free from lien. To enforce it, the company gives notice demanding payment, waits at least fourteen days, and then sells the shares; the buyer gets good title, and the sale proceeds go first to the debt and the balance to the former holder. A lien on fully paid shares exists only if the articles extend it, which listed companies cannot do. A pledge of shares to a lender is different: it is created by the holder, not the company, and is recorded with the depository.
A share transfer deed is the instrument of transfer in Form SH-4 under Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014, by which a holder of physical shares transfers them to a buyer. Section 56(1) of the Companies Act, 2013 requires it to be stamped, dated, executed and delivered within sixty days.
The deed states the parties, the distinctive and certificate numbers, the consideration and the date. Stamp duty is payable at 0.015 per cent of the consideration under the Indian Stamp Act, 1899 as amended from 1 July 2020, and the company registers the transfer and issues a new certificate within one month under section 56(4). In a private limited company the articles restrict transfer, so the board must approve it. For demat shares no SH-4 is needed; the transfer is a delivery instruction to the depository participant and the duty is collected through the depository. A transfer of unquoted shares below fair market value triggers section 92(2)(m) of the Income-tax Act, 2025 for the buyer, so the price on the deed should be supported by a valuation.
Book value per share is a company's net assets attributable to equity shareholders, as recorded in its balance sheet, divided by the number of equity shares outstanding. It is an accounting figure, not a market price, and is the base of the net asset approach to valuation.
The numerator is total assets less total liabilities less preference capital, which equals equity share capital plus reserves and surplus, including securities premium. In the Pune SaaS example, net assets of INR 7,80,00,000 on 1,50,000 shares give a book value of INR 520 per share, against an issue price of INR 1,200 in the last round. The gap is normal where value lies in future cash flows rather than recorded assets. Rule 57 of the Income-tax Rules, 2026 uses a modified version of this measure, adjusting immovable property to stamp duty value and jewellery and securities to fair value, to fix the fair market value of unquoted equity shares. The figure moves with face value: after a 10:1 split the same company shows INR 52 per share. A figure below face value signals accumulated losses.
Market value per share is the price at which one share changes hands between a willing buyer and a willing seller. For a listed share it is the traded price on the exchange; for an unlisted share it is the price in the most recent arm's length transaction or the value fixed by a valuation report.
In the Pune example it is INR 1,200, the price the investor paid, against a face value of INR 10 and a book value of INR 520. For an unlisted company the figure is only as good as the transaction or report behind it, which is why the Companies Act requires a Registered Valuer's report for a preferential allotment, FEMA requires a merchant banker, chartered accountant or cost accountant certificate for a non-resident investor, and income-tax applies Rule 57 for a transfer. A valuer reaches market value through the income approach, the market approach or the asset approach and then applies any discount for lack of marketability or control. Market value per share times shares outstanding gives equity value.
Nominal value is the amount per share fixed in the memorandum of association, and is the term the Companies Act, 2013 itself uses: section 2(8) describes authorised capital as "nominal capital", and section 4(1)(e) requires the memorandum to divide the share capital into shares of a fixed amount. It is identical to face value.
The three words, nominal value, face value and par value, describe one number and are used in different places: the statute says nominal, the market says face, and US documents say par. The word "nominal" carries the point: the figure is in name only and says nothing about what the share is worth. Nominal value times shares issued equals share capital, nominal value is the legal floor under section 53 for any fresh issue, and nominal value is the base for a dividend declared as a percentage. A company changes it only by sub-division or consolidation under section 61, notified in Form SH-7 within 30 days. Every valuation report states the nominal value of the class being valued so that the per-share figure can be compared with the correct denomination.
Related Valuation Clusters
- Preference & Hybrid Instruments: preference shares, CCPS, OCPS and the instruments that convert into the equity shares defined here.
- Cap Table & Ownership Mechanics: pre-money and post-money valuation, dilution, option pools and fully diluted shares.
- India: Companies Act & MCA: section 42 private placement, section 62(1)(c) preferential allotment and the other Companies Act provisions these terms rely on.
