MGT211 ASSIGNMENT NO. 1 SPRING 2023 || 100% RIGHT SOLUTION || INTRODUCTION TO BUSINESS || BY VuTech

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QUESTION

Case

Alpha and Gamma are friends since their childhood. They have got the whole of their education in every school jointly. Recently, both of them have graduated from a local business school getting degrees in business management. After this graduation, they decided to start a business of online car rental. For that purpose, they got developed a mobile application named Carg that can be run on all Android and Apple smartphones. Further, they shared their business plan with a professional promotor to setup a new business entity. With all the necessary documentation, the new entity has been successfully registered on 5th of January 2023 with the SECP as a limited liability company in the name of Alpha Limited. It was registered with the capital of Rs. 500,000 divided into 25,000 ordinary shares of Rs. 20 each. On 20th of January, the new company offered 15,000 shares at par to the general public. On 23rd of January, the company’s bank informed it that application money on 14,500 shares has been received from the general public in the company’s bank account. Alpha’s management allotted shares to all the applicants on 31st of January, 2023.

You are required to identify the kinds of share capital presented in this case describing briefly the each kind.

Solution:

In the given case, the following kinds of share capital are presented:

1. Authorized Share Capital:

The authorized share capital refers to the maximum amount of capital that a company is allowed to raise by issuing shares. In this case, the authorized share capital is not explicitly mentioned, but it can be assumed to be Rs. 500,000 since the company was registered with that capital.

2. Issued Share Capital:

The issued share capital is the portion of authorized share capital that a company has actually issued and allotted to shareholders. In this case, the issued share capital would be 25,000 ordinary shares of Rs. 20 each, which amounts to Rs. 500,000.

3. Subscribed Share Capital:

The subscribed share capital is the portion of issued share capital that has been subscribed or applied for by the shareholders. In this case, the company offered 15,000 shares to the general public, indicating that the subscribed share capital would be 15,000 shares.

4. Called-up Share Capital:

The called-up share capital is the portion of subscribed share capital for which the company has requested payment from the shareholders. In this case, the company received application money for 14,500 shares, indicating that the called-up share capital would be 14,500 shares.

5. Paid-up Share Capital:

The paid-up share capital is the portion of called-up share capital that has been paid by the shareholders. Since the case does not provide information on the payment status, the paid-up share capital cannot be determined.

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