Called up share capital is shares issued to investors under the understanding that the shares will be paid for at a later date or in installments. Shares may be issued in this manner in order to sell shares on relaxed terms to investors, which may increase the total amount of equity that a business can obtain. The reference to “called up” means that the company has issued a request for a portion or all of the unpaid balance. Technically, the demand for payment comes from the board of directors of the issuing company.
Once a shareholder has paid the issuing entity the full amount owed for issued shares, these shares are considered to be called up, issued, and fully paid. However, this does not mean that the shares are registered, which would allow the shareholder to sell the shares to a third party. The registration process requires the issuer to register the shares with the applicable government oversight entity, which involves a lengthy application process and ongoing public reporting of financial results by the issuer.
Once a shareholder has paid for called up share capital, it is most common for the shares to simply be considered part of the total number of shares outstanding, with no further description of their prior status.
Called-Up Share Capital
Depending on the jurisdiction and the business in question, some companies may issue shares to investors with the understanding they will be paid at a later date. This allows for more flexible investment terms and may entice investors to contribute more share capital than if they had to provide funds upfront. The amount of share capital shareholders owe, but have not paid, is referred to as called-up capital.
Share capital consists of all funds raised by a company in exchange for shares of either common or preffered shares of stock. The amount of share capital or equity financing a company has can change over time. A company that wishes to raise more equity can obtain authorization to issue and sell additional shares, thereby increasing its share capital.
Share capital is only generated by the initial sale of shares by the company to investors, e.g. via an IPO. It does not include shares being sold in a secondary market after they’ve been issued.