Paid-Up Share Capital

Paid-up share capital refers to the proportion of issued share capital of a company that has been fully paid for by its shareholders, meaning the company has received the full payment for the shares.
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Paid-up share capital is the portion of called-up capital for which full payment has been received from shareholders. It represents the total amount of the company’s equity that shareholders have paid in full. This term is crucial in assessing a company’s financial health and capital structure.

Examples

  1. Example 1: ABC Corp has issued 100,000 shares at a par value of $10 each. If shareholders have fully paid for all the issued shares, the paid-up share capital of ABC Corp is $1,000,000.
  2. Example 2: XYZ Ltd issues 50,000 shares with a face value of $20 each. If shareholders pay the amount in full, XYZ Ltd’s paid-up share capital is $1,000,000.
  3. Example 3: LMN Inc issued 200,000 shares at a nominal value of $5 each. Shareholders have paid 75% of the value. Thus, the paid-up share capital is $750,000.

Frequently Asked Questions (FAQs)

Q1: What is the difference between issued share capital and paid-up share capital?

  • A1: Issued share capital is the total value of shares that the company has issued to shareholders. Paid-up share capital is the portion of the issued share capital for which the full payment has been received from shareholders.

Q2: Can a company have paid-up share capital without issued share capital?

  • A2: No, paid-up share capital is derived from issued share capital. Without issued share capital, there cannot be any paid-up share capital.

Q3: What happens if shareholders do not fully pay for their shares?

  • A3: If shareholders do not fully pay for their shares, the unpaid portion is referred to as unpaid share capital or calls in arrears. The company can enforce payment of the outstanding amount.
  1. Issued Share Capital: The portion of the authorized share capital that has been offered and sold to shareholders.
  2. Fully Paid Shares: Shares that have been issued and fully paid for by the shareholders.
  3. Called-Up Share Capital: The amount of issued share capital that shareholders are required to pay under a call for payment.

Online References

  1. Investopedia: Paid-Up Capital
  2. Corporate Finance Institute: Share Capital
  3. AccountingTools: Paid-In Capital

Suggested Books for Further Studies

  1. “Financial Accounting and Reporting” by Barry Elliott and Jamie Elliott
  2. “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
  3. “Corporate Finance: Theory and Practice” by Aswath Damodaran
  4. “Accounting Principles” by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso

Accounting Basics: “Paid-Up Share Capital” Fundamentals Quiz

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