Called up share capital definition
/What is Called Up Share Capital?
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.
Example of Called Up Share Capital
Alpha Business enters into an agreement with Mr. Smith, a major investor, under which it will issue 10,000 shares of its common stock to Mr. Smith at an agreed-upon price of $10 per share. Mr. Smith initially pays $5 per share, since he is short on cash at the moment. The agreement states that he will pay off the remainder of the amount owed as soon as he liquidates another investment.