Called-Up Share Capital

Updated on April 24, 2024
Article byPrakhar Gajendrakar
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Called-Up Share Capital?

Called-Up Share Capital refers to the set of shares issued by a company for which it requests full payment, despite knowing that the investors are supposed to pay at a later date or, in some cases, in installments. The term called up here refers to the request made by the company.

Called-Up Share Capital

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Companies tend to sell shares with this technique to increase the total equity amount they can obtain, so it is sold on relaxed terms. The board of directors (BOD) of the company authorizes the payment demand. In a nutshell, this is the payment value not obtained by the investors but requested.

Key Takeaways

  • Called-up share capital is the payment demand and total value of shares that have been sold by the company with the understanding that the investor will pay for it later.
  • It is issued by the board of directors of the underlying company and is one of the core law and accounting procedures for share accounting, financial reporting and stability.
  • If a shareholder defaults on the call-up notice, it leads to loss of equity, interest charges, loss of fund rights, and sale of the shareholder’s stake to third parties.
  • A company holds complete rights to issue shares under an arrangement for later payment. Still, it reserves the right to demand payment upon notice, and the payable amount must equal the value of the shares issued.

Called-Up Share Capital Explained

Called-up share capital is the payment request initiated by a company’s board of directors to those investors who had bought the shares and the company sold them with an agreement to pay for the total share values in the future. It can be an issued request for a portion of the unpaid balance, the total amount, or, in some cases, installments. The whole concept is part of any company’s accounting purposes. It is practiced to differentiate between all the shares issued on uncertain grounds and the shares issued for which the company can demand payment.

A keynote to remember is that only after a shareholder has paid the entire amount for the issued shares, it is considered a called up but it does not mean that the shareholders can sell it to a third party because they are not registered. For this to happen, the issuer has to go through a time-consuming application process to register the shares with the proper authorities and oversight entity. The issuer would also need to make a public report of its financial results.

After the investor has paid off this capital, the shares are shifted to the total number of outstanding shares with no previous status or further details. This is a unique practice of flexible fundraising and not burdening the investors with a huge capital requirement. If shareholders fail to pay the called-up capital, it leads to penalties, legal actions, and, ultimately, forfeiture of the shares.


Check out the below examples to understand the concept better:

Example #1

Suppose Rachel owns a cosmetics company and issues two million shares at an individual price of $4, totaling $8 million in share capital. Rachel and other board members decided that they did not need the whole capital immediately; therefore, they asked investors to pay only $2 per share, which then amounted to $4 million. Rachel uses this capital for her business operations, new projects, and market expansion. The rest of the $4 million remains as uncalled capital.

After nine months, Rachel believes she needs more funds, and so after discussing it with their board members, she issued a request asking investors to deposit the rest of $4 million.

This is where the concept of called-up share capital comes into play. This is a simple example, but in the real financial world, many internal processes and factors need to be considered and accounted for before initiating any such actions.

Example #2

Suppose a company makes a share purchase arrangement with a shareholder where the shareholder is allotted one thousand shares of the company, which amounts to $90,000, given that each share was priced at $90. As per the agreement, the investor pays half of the amount upfront, which is $45,000 upfront, with the arrangement of paying the rest of the amount later.

After four months, the company issues a call-up notice for the investor to make the rest of the payment, which is now the called-up share capital. However, the investor defaults on the payment. The legalities and consequences are generally drafted in the agreement and in accordance with it. The company penalizes the investor with interest charges, late fees, penalties, and other payments. The investor still defaults, which eventually leads to forfeiture of shares. This example focuses on the consequences faced by a shareholder in case they default on payments.

Called-Up Share Capital vs Paid-Up Share Capital

The main distinguishing features between the two are as follows –

  1. Called-up capital allows companies to raise capital without demanding the full payment. In contrast, the paid-up share capital shows the actual funds received by the company and its financial stability.
  2. The called-up share capital is reported as a liability until it is paid. In comparison, the paid up share capital is reflected as the shareholder’s equity on the balance sheet.
  3. Called-up share capital is an obligation to pay the shareholders when the company issues a call for payment. On the other hand, paid-up share capital denotes that the shareholder has completed the payment and, hence, is free from the payment obligation.
  4. Called-up capital offers the flexibility of payment to the shareholders, whereas the paid-up capital elevates the company’s capital and adds to its financial stability.

Difference Between Called-Up Share Capital And Uncalled-Share Capital

The key differences between the two are as follows-

  1. Called-up share capital is the pending payment requested by the share-issuing company to its investors. In contrast, uncalled capital is the amount not called on subscribed capital.
  2. After the share issuance is done on relaxed terms, any amount the company asks becomes the called-up share capital, and when a call-up notice is not issued, the same amount remains uncalled capital.
  3. Although the payment terms are well drafted in the investor’s agreement, it is still up to the issuing company to decide the amount that must be called up from its shareholders. If any amount is left after that is then the uncalled capital.

Frequently Asked Questions (FAQs)

1. Are called-up share capital paid dormant accounts?

No, this capital should never be paid through dormant accounts. If an investor has a bank account that has not been used for a long period, it becomes dormant. While paying the called-up share capital, such accounts can create transactional errors and payment issues, so they should not be used for it.

2. Can paid-up capital exceed called-up share capital?

Yes, the paid-up capital can exceed the called-up share capital. This can happen because if the company receives full payment for the called-up capital, it will equal the paid-up capital. Suppose an investor bought shares worth $9000 but initially paid only $4500. After some time, the company demands another portion, and the investor pays another $2250. In this scenario, the investor has already paid $6750, which exceeds the called-up share capital.

3. What is the difference between called-up share capital and subscribed capital?

The former is the payment request from investors who have only paid a portion of the total share capital. Now, the company is asking for the remaining amount. In contrast, subscribed capital is that part of the issued capital the public has subscribed to. When the issued capital and subscribed capital become equal, it simply means that the public subscription is fully subscribed.

This article has been a guide to what is Called-Up Share Capital. We explain its examples and compare it with paid-up share capital and uncalled share capital. You may also find some useful articles here –

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