# Share Capital Concepts, Free Reserves & Net Worth
The Act recognises four layers of share capital — each more 'real' than the last. These plus Free Reserves and Net Worth are critical for dividend, buy-back, deposit & loan provisions.
## The Four Layers of Capital
Concept
Definition
Where?
Authorised / Nominal Capital [Sec 2(8)]
Maximum capital authorised by the MoA that the company can issue
MoA Clause V
Issued Capital [Sec 2(50)]
Capital the company issues from time to time for subscription
Subset of Authorised
Called-up Capital [Sec 2(15)]
Part of issued capital which has been called for payment
Subset of Issued
Paid-up Share Capital [Sec 2(64)]
Aggregate money credited as paid-up, including amounts credited (even if not received in cash)
Q: Company has authorised capital ₹10 cr (1 cr shares of ₹10); issued 60 lakh shares; called ₹8 per share; shareholders have paid ₹8 per share on 50 lakh shares only. State the four capital figures.
Treating Paid-up = Called-up always — only when 100% of called amount is actually received.
Including securities premium when computing 'free reserves' or in 'received' part of paid-up (it is added in Net Worth but NOT in paid-up capital).
Including Revaluation Reserve in Net Worth — it is expressly excluded.
Counting unrealised fair-value gains as free reserves — excluded by proviso to Sec 2(43).
Bare-Act text Section 2(8), 2(15), 2(43), 2(50), 2(57), 2(64) · Companies Act, 2013 · click to expand
Sec 2(8): 'Authorised capital' or 'nominal capital' means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.
Sec 2(15): 'Called-up capital' means such part of the capital, which has been called for payment.
Sec 2(43): 'Free reserves' means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend: Provided that (i) any amount representing unrealised gains, notional gains or revaluation of assets or (ii) any change in carrying amount of an asset or of a liability recognised in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value, shall not be treated as free reserves.
Sec 2(50): 'Issued capital' means such capital as the company issues from time to time for subscription.
Sec 2(57): 'Net worth' means the aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.
Sec 2(64): 'Paid-up share capital' means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called.