What is legal capital?
Legal capital is the value of outstanding shares of the company. This value is maintained on the main book of the Company's accounting and is limited from use for dividends or other distribution. The amount of legal capital is based on the nominal value of the shares if it is issued on the open stock exchange. The new value has no relation to the actual market value of shares or changes in shopping and selling prices among investors. Legal capital and nominal value are basic items concerning investment in equity. Historically, stock markets were an unregulated sector, and for companies that want to issue shares between individuals and investors, they required several basic standards. The new stock value has been developed to ensure that investors will not be sold at different prices. When the initial public offer (IPO) was announced, the company had to announce the nominal value of their shares. This nominal value was a minimum issuing price of paid investors; Comparies then ZapnaMenal's total nominal value as legal capital in its accounting book. This allowed the company to maintain the basic accounting value on unregulated markets with securities for ordinary shares. Investors of shares could reasonably estimate the amount of legal capital, which the Company had on accounting books by reviewing all issued tickets per stock. This information would then be compared with the company's financial statement to see if there are any irregularities in the company's share balance.
legal capital has largely become an archaic investment tool in today's business world. Most of the ordinary shares are now issued at a nominal value of $ 0.01 or without a nominal value. The ordinary shares without a nominal value may have a specified amount of legal capital earmarked by the company's board of directors or omit managerial entity. This capital must remain at hand after they areall distribution or division of shareholders.
The most common IPO shares have no dividends to purchase shares. Dividends are paid only to the preferred stock shares. The new value for preferred stocks is still important on today's business market and must be announced by companies issuing preferred shares. Dividends can be calculated as a percentage of the total nominal value of shares. The total nominal value of preferred shares must be reported as legal capital in the company's balance sheet. Most companies must report preferred shares separately from the total capital to the financial statements.