Nominal capital definition

What is Nominal Capital?

Nominal capital is the aggregate par value of those shares that have been issued by a corporation. Since par value is typically set at $0.01 per share, the total nominal value of a company is quite low. In cases where there is no par value at all, a firm has no nominal capital.

The amount of nominal capital that a business has recorded on its books is not necessarily the same as the total capital that it has raised from the sale of its shares. For example, if a company has sold 10,000 shares of its common stock for $5 per share when the par value of each share was $0.01, then the total capital raised would be $50,000, while the amount of its nominal capital from the sale of these shares would only be $100.

Example of Nominal Capital

A business sells 1,000,000 shares of its common stock to investors. These shares have a par value of $0.01 per share. Given this information, the nominal capital of the business is $10,000 (calculated as 1,000,000 shares x $0.01 par value per share).