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Paid-Up Capital

What is 'Paid-Up Capital'

Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. Paid-up capital is only created when a company sells its shares on the primary market directly to investors. When shares are bought and sold between investors on the secondary market, no additional paid-up capital is created because the proceeds of those transactions go to the selling shareholders, not the issuing company.

Explaining 'Paid-Up Capital'

Paid-up capital, also called paid-in capital or contributed capital, is comprised of two funding sources: the par value of stock and additional paid-in capital. Each share of stock is issued with a base price, called its par. Typically, this value is quite low, often less than $1. Any amount paid by investors that exceeds the par value is considered additional paid-in capital, or paid-in capital in excess of par. On the balance sheet, the par value of issued shares is listed as common stock or preferred stock under the shareholder equity section, depending on the type of stock issued.

Paid-Up vs. Authorized Capital

When a company wants to raise equity, it cannot simply sell off pieces of the company to the highest bidder. Businesses must request permission to issue public shares by filing an application with the agency responsible for the registration of companies in the country of incorporation. In the United States, companies wanting to "go public" must register with the Securities and Exchange Commission (SEC) before issuing an initial public offering (IPO).

Importance of Paid-Up Capital

Paid-up capital represents money that is not borrowed. A company that is fully paid-up has sold all available shares, and thus cannot increase its capital unless it borrows money by taking on debt or gets authorization to sell more shares. A company's paid-up capital figure represents the extent to which it depends on equity financing to fund its operations. This figure can be compared to the company's level of debt to assess if it has a healthy balance of financing given its operations, business model and the prevailing standards in its industry.


Further Reading


Re-engineering agriculture for enhanced performance through financing
papers.ssrn.com [PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …

Impacts of equity financing on liquidity position of a firmImpacts of equity financing on liquidity position of a firm
www.tandfonline.com [PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …

Research on China SMEs Financing Efficiency <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-XUXI200601032.htm' />Research on China SMEs Financing Efficiency [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-XUXI200601032.htm'>PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …

Subregional financial cooperation: the South American experienceSubregional financial cooperation: the South American experience
www.tandfonline.com [PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …

Financial Appraisal of Haryana State Cooperative Apex BankFinancial Appraisal of Haryana State Cooperative Apex Bank
ideas.repec.org [PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …

Integrating risk management and capital managementIntegrating risk management and capital management
onlinelibrary.wiley.com [PDF]
… Acharya, PR (2017, August 22). NRB issues circular on paid-up capital rules … Bace, E. (2016). Bank profitability: Liquidity, capital and asset quality … Analysis of Credit Culture in the Zimbabwean Banking Sector. Journal of Economics and Finance (DRJ-JEF), 4(2), 45-55 …



Q&A About Paid-Up Capital


What can you determine about companies that are fully paid up with no debt or authorization to sell more shares?

They cannot increase their capital unless they borrow money by taking on debt or get authorization to sell more shares.

What does common stock refer to?

Common stock refers to any class or type of common stock.

What is the definition of share capital?

Share capital is the portion of a corporation's equity that has been obtained by the issue of shares in the corporation to a shareholder, usually for cash.

How much does each share have as its par value?

Each share has a base price, called its par. Typically, this value is quite low, often less than 1. Any amount paid by investors that exceeds the par value is considered additional paid-in capital or paid-in capital in excess of par.

Where is paid-in capital listed on a balance sheet?

It is listed under shareholder equity on the balance sheet.

What happens to proceeds from secondary market transactions?

The proceeds from secondary market transactions go to the selling shareholders and not to the issuing company.

What is paid-up capital?

Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock.

When are shares issued below par considered part-paid?

Shares are issued below par when they are issued at a discount or part-paid.

How does share capital differ from issued shares?

In a strict accounting sense, share capital is the nominal value of issued shares (that is, the sum of their par values). If the allocation price of shares is greater than their par value, as in a rights issue, they are said to be sold at a premium (variously called additional paid-in capital or paid-in capital in excess of par).