Understanding Called Up Share Capital in Business
Called up share capital is the portion of issued shares a company asks shareholders to pay. Learn how it differs from paid-up capital. 6 min read updated on August 05, 2025
Key Takeaways
- Called up share capital refers to the portion of issued share capital a company requests shareholders to pay.
- Companies may collect payments in installments, leaving part of the issued capital unpaid until it is “called.”
- It differs from paid-up capital, which reflects the amount shareholders have already paid.
- Called up capital becomes fully paid-up once shareholders fulfill their payment obligations.
- Share capital categories—authorized, issued, called up, and paid-up—play distinct roles in a company’s capital structure.
- Legal and financial documentation must accurately reflect each category for transparency and regulatory compliance.
Called up capital (or called up share capital) is the part of share capital a company requires its shareholders to pay. It's different from paid-up capital, which is the payment a shareholder has already made to a company for shares and stock.
Called up Capital Overview
Typically, companies don't ask for the full amount of shares to be paid at once. They often call for partial payments during allotment. The amount of shares companies call for as partial payment is what is referred to as called up share capital. Companies issue shares in this manner to sell their shares to potential shareholders on relaxed terms, which can potentially raise the sum of equity obtainable by a business.
If a company receives full payments for called up capital from its shareholders, the called up capital and the paid-up capital will be equal. However, because of defaulting investors who don't pay as they should, a company's called up share capital doesn't equal its paid-up capital.
The moment a shareholder pays an issuing entity the complete amount due for issued shares, the shares are said to be issued, called up, and fully paid. However, that isn't the same as registering the shares, which would qualify the shareholder to sell them to another party. The registration process requires the issuer to register the shares with the governmental overseeing body, which takes a long process of application and continued public reporting of the issuer's financial results.
Importance in Financial Reporting
Called up share capital plays a crucial role in a company's balance sheet presentation. It is listed under shareholders’ equity, reflecting the amount that has been requested from shareholders but not yet fully paid. The breakdown is typically shown as:
- Issued Capital – Total nominal value of shares issued.
- Called Up Capital – Portion of the issued capital requested for payment.
- Paid-Up Capital – Portion of called up capital already received.
- Uncalled Capital – Balance not yet called for payment.
These distinctions help investors and regulators assess the company's capital structure and financial obligations.
Legal Status of Called Up Capital
Called up capital is legally binding. Once a company issues a call for payment, shareholders are obligated to pay the amount requested. This obligation may be enforced under the terms of the shareholder agreement or the company’s articles of association.
Failure to comply with a call can result in legal consequences such as forfeiture of shares, loss of voting rights, or court action. For publicly traded companies, compliance with corporate regulations and securities laws is also essential to ensure accurate disclosure of capital obligations.
How Called Up Share Capital Works
Called up share capital arises when a company issues shares with the understanding that payment will be made in the future or in set installments. This approach allows the company to raise capital progressively rather than requiring full payment upfront.
For example, if a shareholder subscribes to 1,000 shares at $10 each, the company may initially call for only $5 per share. The remaining $5 is then called up at a later date, either in one installment or in stages. This staggered payment structure offers flexibility for both the company and shareholders.
Importantly, companies are not obligated to call up the entire unpaid portion unless needed. Uncalled capital represents a potential funding source for future needs.
Share Capital
The moment a shareholder pays completely for called up share capital, it's common for the shares to be deemed part of a total number of outstanding shares that have no further description of their earlier status. The fund a company raises, which is exchanged for different kinds of stock (preferred share and common), make up the share capital of the company. A company's amount of equity financing or share capital can change with time.
If a company decides to generate more equity, it can acquire authorization to allot and sell more shares in order to increase its share capital. A company's share capital is solely raised through the original sale of the company's shares to shareholders. It doesn't include the shares that are sold in a different market after allotment.
Authorized Share Capital
Authorized share capitals are the maximum amounts of share capitals companies are authorized to generate. This restriction is spelled out in a company's constitutional records and can be altered only with its shareholders' approval. For a publicly traded company to market stock, it has to specify the limit of the share capital amount it is authorized to generate. Typically, a company doesn't issue the complete measure of its authorized share capital. The company reserves some of it for potential future use.
Issued Share Capital
The sum of the value of shares elected by a company for sale is referred to as the issued share capital. That means the company may choose to issue only a portion of the whole share capital with the intention of allotting more shares later. Generally, the amount of issued share capital is a lot lower than the authorized share capital. That way, the business can issue additional shares later.
Not all the shares may be bought right away. Again, the par value of the allotted capital can't be more than the financial worth of the authorized capital. The company's paid share capital is the sum of the par value of the shares it sells. That's what people generally refer to when they talk of share capital.
Paid-up Capital
The sum of money a company gets as payment from its shareholders for its stock is the paid-up capital of the company. The cost of a stock's share comprises two bits — a par value and an extra premium paid, which is higher than the par value. A sum of the par value of shares sold is recorded as common stock, whereas the leftover is allocated to the extra paid-up capital account.
A company that uses up huge chunks of equity finances can bear lesser amounts of debt than a company that doesn't. The following are the advantageous qualities of a company with lower debt-equity ratios than its industry's average:
- It shows expert financial resource management
- It possesses reduced debt burdens
- It's potentially a good candidate for investment
Differences Between Called Up and Paid-Up Capital
While closely related, called up capital and paid-up capital differ in timing and accounting treatment:
Aspect | Called Up Capital | Paid-Up Capital |
---|---|---|
Definition | Amount requested by the company from shareholders | Amount shareholders have actually paid |
Accounting Treatment | Recorded as receivable under equity | Recorded as part of equity once payment is received |
Legal Obligation | Becomes enforceable once a call is made | Indicates fulfillment of legal payment obligation |
Impact on Cash Flow | Reflects expected future inflow | Reflects actual cash received |
These terms often appear together in financial documents but serve distinct roles in assessing a company’s capital health.
Frequently Asked Questions
-
What happens if shareholders don’t pay called up capital?
If shareholders fail to pay a call, the company may initiate forfeiture proceedings or legal action to recover the owed amount. -
Can a company issue shares without calling any capital?
Yes. Companies can issue shares and defer all payment, classifying the entire amount as uncalled capital. -
Is called up share capital shown on the balance sheet?
Yes. It appears under equity, usually as a separate line or within issued capital notes. -
What is the purpose of calling up share capital in installments?
It gives companies flexibility in capital management and makes shares more accessible to potential investors. -
Can called up capital exceed issued capital?
No. Called up capital is a subset of issued capital and cannot exceed the number of shares issued.
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