Finance and Management - 19

In the last blog, we discussed about the concepts of paid up capital and a few more. In
this blog, we try to understand the meaning of Par Value.


Par Value is also called the face value of the company's stock. This represents
the minimum amount that a shareholder must pay on each share. This is
the legal minimum capital of the company. In case the company is
declared insolvent and the shareholder has to pay to its debtors, then
each shareholder can be compelled to pay the par value of the shares
held by him/her.


Companies are prohibited from returning any part of the minimum capital except by
following a special procedure; this is done to protect the interest of
the creditors of the company. If this was allowed, the shareholders
could withdraw all the assets and leave behind nothing for the
creditors!


Read in Kannada:
http://somanagement.blogspot.com/2011/08/blog-post_4471.html