Definition of Called-up Share Capital
Called-up share capital is the portion of a company’s issued share capital that shareholders have been requested to pay. When a company issues partly paid shares, it means that shareholders initially pay only part of the share’s face value, and the company can call for the remaining amount to be paid at a later date. The amount that has been called up, but not necessarily paid, is known as called-up share capital.
Examples of Called-up Share Capital
Example 1:
- Scenario: A company issues 1,000 shares at $10 each, but shareholders are initially required to pay only $4 per share as partly paid-up shares.
- Called-up Share Capital: If the company later calls for another $3 per share, the called-up share capital is $7,000 (1,000 shares * $7).
Example 2:
- Scenario: XYZ Corporation issues 500 shares of $20 each with $8 paid initially.
- Called-up Share Capital: If the directors call for an additional $5 per share, the called-up share capital becomes $6,500 (500 shares * $13).
Frequently Asked Questions
What is the difference between called-up share capital and paid-up share capital?
- Called-Up Share Capital is the amount requested by the company that shareholders need to pay, whereas Paid-Up Share Capital is the portion that has been fully paid by the shareholders.
Can a shareholder refuse to pay the called-up share capital?
- Shareholders generally cannot refuse to pay the called-up amount as it is part of their contractual obligation when they subscribe to the shares.
What happens if a shareholder does not pay the called-up share capital?
- If a shareholder defaults on the payment, the company may have the right to forfeit their shares and sell them to recover the unpaid amount.
Is called-up share capital listed on the balance sheet?
- Yes, the called-up share capital is recorded in the equity section of the company’s balance sheet until it is fully paid up.
Related Terms
Issued Share Capital
Issued Share Capital is the total value of shares that have been issued to shareholders, regardless of whether they are fully paid or partly paid.
Partly Paid Shares
Partly Paid Shares are those for which shareholders have not fully paid the face value. The unpaid portion can be called up by the company at a future date.
Paid-Up Share Capital
Paid-Up Share Capital is the amount of called-up share capital that shareholders have already paid. This represents the actual funds received by the company.
Online References
Suggested Books for Further Studies
- “The Essentials of Corporate Finance” by Stephen A. Ross - This book provides a comprehensive overview of corporate finance, including topics on share capital.
- “Financial Accounting: An Introduction” by Pauline Weetman - A detailed exploration into financial accounting principles with sections covering share capital.
- “Company Law” by Alan Dignam and John Lowry - Explores legal frameworks around share capital, including called-up and paid-up shares.
Accounting Basics: “Called-up Share Capital” Fundamentals Quiz
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