Feedback

 

Share capital

One way for a company to acquire capital or assets is to get individuals to contribute money or assets to the company, in exchange for shares in the company. This is known as share capital. The purchase of shares by an investor is not a loan to the company, because shareholders do not expect to be repaid this money while the company continues in existence.

The more shares that an individual purchases, the greater the number of shares in the company they obtain. This entitles them to a greater share of the expected profits that the company will make. When the company is eventually wound up, the shareholders will be entitled to repayment of their original contribution if there are sufficient funds available.