The authorized capital is formed due to certain conditions of the legislation, as well as the principles of a market economy. Due to this dual nature, real and face value own sources of funds is different.
What these concepts mean by themselves, how to correctly interpret them, should be understood by the company's management and its financial specialists. What affects the nominal share price, how to determine the real value of this indicator, should be considered in more detail.
The concept of share capital
The authorized capital is formed when creating a joint stock company. It consists of the shares of capital that the founders contribute to its balance sheet. To fix how many monetary units or property each participant contributed, various types of securities are issued.
They reflect the cost of capital and material values, of which will be the balance of the future enterprise at the time of its creation. Each founder owns a certain share.
Each share has its nominal value. The authorized capital is made up of the total amount. Legally established its minimum size.
For open joint stock companies it is equal to one thousand times the minimum wage. For closed companies, this level is equal to one hundred times the minimum wage.
Stocks
The nominal value of the authorized capital means the sum of all shares issued by the enterprise. It is valid at the time of the creation of society.
The nominal value of shares is at the beginning of the first year of operation the real market value of the property and financial resources that the shareholders contributed to the initial fund of their enterprise.
Of this money, the necessary equipment is purchased, raw materials and materials are purchased.
Shares almost always give their owners the right to take part in the management of their company. The larger the share of the nominal value of their securities in the total issue, the greater the shareholder’s vote in the adoption of certain decisions.
Accordingly, the larger the par value of the shares owned by the founder, the greater the dividend income he can receive at the end of the operating period.
Registered capital
If when creating a company, the nominal value of the authorized capital is real, then after the first year of work, it can change. On company accounts, real money can become more or less.
Net assets determine the real value of capital. If at the end of the first year of operation the joint-stock company made a profit, it can, in addition to paying dividends, send a part of the funds to expand production. In this case, new equipment is purchased, additional product lines are opened, etc.
The balance sheet currency will increase due to its own sources of financing. But the authorized capital will remain unchanged. The same is observed in the case of loss according to the results of the first year of work. Only in this case the balance sheet currency will decrease.
Share capital
To determine the nominal value of a share, you just need to look at the specified details of the securities. It remains unchanged if the company regularly makes a profit.
But the law establishes the fact that the authorized capital should not be more than net assets.Therefore, having received a loss based on the results of the current period, the company management should announce a reduction in the nominal share of all participants in proportion to their contribution.
A decrease in this indicator occurs to the level of net assets. In the case where the real value equity falls below the minimum level allowed by law, the company is subject to reorganization.
Increase the authorized capital
The nominal value of capital can be increased in two ways. In the first case, at a meeting of the founders, a decision is made to carry out a new issue of shares, and in the second, the face value of existing shares is increased.
For the first way to increase the authorized capital, the company announces a new issue of its securities. The quantity and par value of each share is officially announced.
They can be distributed in different ways. Mostly they are bought by the founders themselves, but their distribution between employees or other investors is possible.
By increasing the par value of existing shares, the founders confirm their deposit of property. This value should not exceed the amount of net assets after deduction of the authorized capital and reserve fund.
Rating reduction
In order to understand how the nominal value of the share of each shareholder is calculated, it is necessary to calculate an example of such an action.
For example, the authorized capital of an enterprise is 100 million rubles. It consists of 10 million pcs. ordinary shares with a par value of 10 rubles each
In the reporting period, the company suffered a loss. The amount of its net assets is now only 4 million rubles. Legislation obliges management to reduce the nominal value of the authorized capital. Therefore, at the beginning of the new operating period, the number of ordinary shares did not change.
Now the nominal price reaches its real level:
4 million rubles : 10 million pcs = 0.4 rub.
Each founder owns the previous share, but its face value is only 40 kopecks. per share.
Calculation of the increase in face value
If a company regularly makes a profit, it can increase its authorized capital and balance sheet currency. At the same time, for example, it was decided at a meeting of founders to increase the face value of already issued securities.
If the company had a registered capital of 100 million rubles, and 10 million ordinary shares were issued, the nominal value of each was 10 rubles. But, unlike the previous example, the company based on the results of the reporting period made a profit of 1 billion rubles.
If there are no debts, its net assets amounted to 1.1 billion rubles. Accordingly, if dividends were not paid, and the funds were allocated in full to the development of production, their nominal (real) value now reaches:
1.1 billion rubles. : 10 million pcs = 110 rub.
In real production conditions, it is difficult to assess the true value of assets. Therefore, most often it is very different from the face value of shares. This indicator allows you to determine the share of the owner in the distribution of company income and indicates the weight of his vote in decision-making on managing the organization.
Having become acquainted with such a concept as the nominal value of shares, it can be understood that in the conditions of production it only means the share of capital contributed by each participant.
