Share capital can be the money that partners contribute to a company without the right of return.
The concept of social capital can be analyzed from two perspectives: accounting and sociology . As an accounting term, share capital is the value of assets or money that partners contribute to a company without the right of return.
In this way, the share capital (which is recorded in an accounting item) grants the partners different rights depending on their participation and represents a guarantee against third parties. This is a stable figure, although negative results can lead to bankruptcy and then the company will have the necessary resources to meet its obligations with third parties.
It is also important to establish in this sense that there is also what is known as minimum social capital . This term is used to define the capital that every company must maintain as a minimum. It is important to emphasize that this will be one or the other depending on the type of company it is, in this way a public limited company must have a much higher minimum share capital than that of one that is limited liability.
Social capital as a liability
In another sense, share capital is a liability (debt) of the company towards its partners. To modify said contribution, a series of legal procedures must be followed.
It is worth distinguishing between the notions of social capital, social equity (the totality of the company's assets and liabilities) and net equity (the effective difference between assets and liabilities).
Social capital is what makes cooperation between two parties possible.
Enlargement and reduction
In addition to all of the above, we have to take into account that an increase in share capital can take place within a company. This is achieved through different actions or situations such as, for example, monetary contributions, non-monetary contributions, by transforming profits or reserves as well as by offsetting credits against the company.
In the same way, it is also possible that a specific company suffers a reduction in its share capital. In this case, the circumstances that may lead to this event are the refunds of contributions, the increase in the legal reserve, the forgiveness of passive dividends or with the clear objective of eliminating losses.
The last mentioned event was decided to be carried out with the intention of recovering the existing balance between capital and net worth. Hence, this compensation for losses can be achieved either by reducing the accounting size of the company or through the profits of the company.
Social capital according to sociology
For sociology, social capital is what makes cooperation between two parties possible. The notion does not necessarily imply something positive, since contacts between people can give rise to negative events (such as mafia societies, for example).
In other words, social capital implies the sociability of a human group, with the aspects that allow collaboration and its use. Sociologists highlight that social capital is formed by social networks, mutual trust and effective norms, three concepts that are not easy to define and that can vary according to the analyst's conception.