This document compares and contrasts shareholders' loans and an increase in share capital for companies. It discusses that shareholder loans are a form of borrowing money as debt, while an increase in share capital involves raising more investment money by issuing new shares. The procedures for each are also different, as shareholder loans must follow rules for borrowing, while increasing share capital involves passing an ordinary or special resolution and notifying the registrar of the increase.
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Difference Between Shareholders Loan and Increase in Share Capital
This document compares and contrasts shareholders' loans and an increase in share capital for companies. It discusses that shareholder loans are a form of borrowing money as debt, while an increase in share capital involves raising more investment money by issuing new shares. The procedures for each are also different, as shareholder loans must follow rules for borrowing, while increasing share capital involves passing an ordinary or special resolution and notifying the registrar of the increase.
This document compares and contrasts shareholders' loans and an increase in share capital for companies. It discusses that shareholder loans are a form of borrowing money as debt, while an increase in share capital involves raising more investment money by issuing new shares. The procedures for each are also different, as shareholder loans must follow rules for borrowing, while increasing share capital involves passing an ordinary or special resolution and notifying the registrar of the increase.
Difference between shareholders loan and increase in share capital
Aspect Shareholdes loan / loan capital Share capital
Definition 1.The capital raised by borrowing is referred as loan capital or loan finance. 2. A company may raise loan capital only by complying with the rules and procedures with regard to borrowing as prescribed in the Act and the companys constitutional documents. The third schedule contains clause 13 which empowers a company to borrow or raise or secure 1. The amount of share capital is re!uired to state in the memorandum. 2. "ncrease in the share capital may enable the company to increase its borrowing capacity. #rocedure 1. A debenture may ta$e one of three forms% &a' An ac$nowledgement of a debt under seal. &b' An instrument charging the property of the company. &c' An instrument charging the property of the company with the repayment. 2. A company that ma$es an in(itation to the public to ta$e up debentures or accept money from the public obliged to issue document which ac$nowledge the companys indebtedness in respect 1. "ncrease the share capital by the creation of new shares of such amount as the company thin$s e)pedient. 2. Table A. Article *+ &a' allows a company by ordinary resolution from time to time to increase its share capital by such sum to be di(ided into shares of such amount as the resolution shall prescribe. 3. "ncrease of share capital merely increase the amount of nominal or authori,ed share capital of the company. *. -ot applicable for issued or paid up share capital. .. "f the pro(ision in Table A is e)cluded and article of association do not gi(e of the loan or deposit. The debenture pro(ision in #art "/ Di(ision * of the Act apply to this document. 0nly public company may ma$e in(itation to the public to lend to them. #ri(ate companies are re!uired by section 1.&1' to ha(e in their 1emorandum or articles a clause prohibiting the issue of debentures or accepting money from public. authority to increase companys share capital need to be done by special resolution under section 31 &1' to pro(ide the rele(ant authority. 2ost 1. 2alling a general meeting to consider an increase of share capital the notice con(ening the meeting shall be specify the proposed increase. 2. "f a company has increased its share capital beyond its registered capital must within 1* days after passing the resolution authori,ing the increase lodge with the registrar the notice of increase. 3. "f there is a default the company and e(ery officer of the company who is in default will be liable to the fine.