Paid-Up Capital
/peɪd ʌp ˈkæpɪtəl/
Paid-up capital is the actual amount of money and assets that shareholders have contributed to a company in exchange for shares, representing the portion of authorised share capital that has been fully paid for.
Paid-up capital is the actual amount of money and assets that shareholders have contributed to a company in exchange for shares, representing the portion of authorised share capital that has been fully paid for.
Paid-up capital represents the real money and assets that shareholders have actually given to your company when they bought shares.
Unlike authorised capital (which is just the maximum you could raise), paid-up capital is what's actually in the bank or contributed as assets.
Authorised capital is the maximum amount your company is legally allowed to raise through share sales, whilst paid-up capital is the portion that shareholders have actually paid for.
Think of authorised capital as your fundraising limit and paid-up capital as what you've actually collected so far.
Paid-up capital shows investors and creditors how much real money shareholders have committed to the business.
It demonstrates financial stability and the founders' commitment, whilst also affecting your company's borrowing capacity and credibility with suppliers and partners.
Calculate paid-up capital by adding up all the money and fair value of assets that shareholders have contributed when purchasing shares.
This includes initial investments, subsequent funding rounds, and any non-cash contributions like equipment or intellectual property that were exchanged for shares.
When paid-up capital increases through new share issues or additional payments on partly-paid shares, your company gains more resources whilst shareholders receive ownership stakes.
This strengthens the balance sheet and provides more working capital for business operations and growth.
Paid-up capital typically cannot decrease through normal operations, as it represents permanent contributions from shareholders.
However, it may reduce through formal capital reduction procedures approved by shareholders and filed with the relevant company registry, though this requires specific legal processes.
Paid-up capital appears in the equity section of your balance sheet, usually broken down into different share classes and showing the nominal value of issued shares.
It forms part of shareholders' equity alongside retained earnings and other reserves.
