ACCA F4 - Corp and Business Law (ENG)

230 15: Share capital  Part E Capital and the financing of companies

Information about any special rights attached to shares is obtainable from one of the following

documents which are on the file at Companies House:

 The articles, which are the normal context in which share rights are defined.

 A resolution or agreement incidental to the creation of a new class of shares (copies must be

delivered to the Registrar).

 A statement of capital given to the Registrar within one month of allotment, together with the

return of allotment.

2.2 Types of capital

The term 'capital' is used in several senses in company legislation, to mean issued, allotted or called up

share capital or loan capital.

2.2.1 Authorised share capital

Under previous company legislation, companies had to specify a maximum authorised share capital that

it could issue. Under the 2006 Act, the concept of authorised share capital was removed.

2.2.2 Issued and allotted share capital

Issued and allotted share capital is the type, class, number and amount of the shares issued and allotted to

specific shareholders, including shares taken on formation by the subscribers to the memorandum.

A company need not issue all its share capital at once. If it retains a part, this is unissued share capital.

Issued share capital can be increased through the allotment of shares.

Rights issues and the issue of bonus shares will also increase the amount of a company's capital.

2.2.3 Called up and paid up share capital

Called up share capital is the amount which the company has required shareholders to pay now or in the

future on the shares issued.

Paid up share capital is the amount which shareholders have actually paid on the shares issued and called up.

For example, a company has issued and allotted 70 £1 (nominal value) shares, has received 25p per share

on application and has called on members for a second 25p. Therefore its issued and allotted share capital

is £70 and its called up share capital is £35 (50p per share). When the members pay the call, the 'paid up'

share capital is then £35 also. Capital not yet called is 'uncalled capital'. Called capital which is not yet

paid is termed 'partly paid'; the company therefore has an outstanding claim against its shareholders and

this debt is transferred to the new shareholder if the share is transferred.

As we saw earlier, on allotment public companies must receive at least one quarter of the nominal value

of the shares paid up, plus the whole of any premium.

2.2.4 Loan capital

Loan capital comprises debentures and other long-term loans to a business.

Loan capital, in contrast with the above, is the term used to describe borrowed money obtained usually by

the issue of debentures. It is nothing to do with shares.

Key term

Key term

FAST FORWARD

Key terms

Key terms

Key term