What is Called Up Share Capital? Definition, Calculation and Examples
Called Up Share Capital Definition
Called up share capital represents shares in a company where the shareholders haven’t fully paid for them upfront.
When a company issues shares, it may not need shareholders to pay the full value of the shares straight away.
Instead, the company would “call up” a portion of the shares, which indicates that they now want to receive payment for those shares from the shareholders.
How to Calculate Called Up Share Capital
Called up share capital can be calculated by using the following formula:
Called Up Share Capital = Nominal Value x Number of Issued Shares
Where:
Nominal Value = the initial value given to each share at the time that the shares are issued.
The nominal value is also known as the face value.
For example, if a company issues 10,000 shares with a nominal value of £1 each, the called up share capital would be £10,000.
Called Up Share Capital Examples
Let’s now look at some real-world examples of where called up share capital could be used:
Rights Issue
A company may issue additional shares to existing shareholders through a rights issue.
Shareholders are given the right, but not the obligation, to buy more shares at a discounted price to the current market value.
The company may call up a portion of these new shares for payment, representing the called up share capital.
Initial Public Offering (IPO)
When a company decides to go public and issue shares through an IPO, it might not call up the entire share capital at once.
Instead, they may call up a certain percentage or a specific number of shares for payment, and this amount would be the called up share capital.
Instalment Payments
Some companies allow shareholders to pay for their shares in instalments.
The company might call up a certain percentage of the share capital in each instalment, and this would represent the called up share capital.
What is Called Up Share Capital Not Paid?
Called up share capital not paid refers to the portion of the called up share capital that shareholders have not yet paid to the company.
It represents the outstanding amount that shareholders are obligated to pay.
In other words, it is the difference between the total called up share capital and the amount that shareholders have already paid.
For example, if a company issues 10,000 shares with a nominal value of £1 per share, the total called up share capital would be £10,000.
If shareholders have already paid for 7,000 shares, the amount paid is £7,000.
Therefore, the called up share capital not paid, would be £3,000 – ie the difference between the total £10,000 and the £7,000 already paid.
Called Up Share Capital Paid | £7,000 |
Called Up Share Capital Not Paid | £3,000 |
Total Called Up Share Capital | £10,000 |
This concept is crucial for both the company and its shareholders.
From the company’s perspective, tracking the called up share capital not paid helps to manage outstanding liabilities.
On the other side, shareholders need to be aware of their remaining commitments to eventually pay for their unpaid shares at some point in the future.