does the paid up share capital of a pvt. ltd. co. represent the investment of the owners/directors of the co.?

Question

Does it mean that the business owes the money to the share holders?
do we have to consider it when we want to know the total investment in the business?

Answer 1

does the paid up share capital of a pvt. ltd. co. represent the investment of the owners/directors of the co.?
The answer is yes, the paid-up capital is what the shareholders have invested in the business. However that may not be all. If the co. needed more funds at a certain time, the shareholders, who may or may not be the directors, may make loans to the co.

Does it mean that the business owes the money to the share holders?
If you're referring to the paid-up capital, no, the business does not owe the shareholders. If the business does well, the co. can "return" the capital to the shareholders by paying them dividends, but a co. cannot repay capital to the shareholders. If the business does badly and incurs losses, the shareholders have lost out, that's all. The business does not owe the shareholders repayment of their share capital.
If you're referring to any loans which the shareholders might have made to the co., yes, the business owes the shareholders and must repay them their loans. Loans are liabilities to the co. They're not equity.

do we have to consider it when we want to know the total investment in the business?
Yes, paid-up capital is very much a part of the investment in the business.

Answer 2

In simple words, it is so; though technically and practically not necessarily all the directors could be the investors in the private limited company - if the company's Articles of Association permit so.

Ques.: Does it mean that the business owes the money to the share holders?

Yes, for accounting purposes it is reflected as though the business owes the money to the share holders.

For the last question, "one" of the methods to arrive at the total investment in the business do consider the paid-up capital of a private limited company.

Answer 3

Find more details about paid up share capital of a pvt. ltd. co. represent the investment of the owners/directors of the co
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