shares please help!!!!!!!!

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lgarside
lgarside Registered Posts: 122 Dedicated contributor 🦉
in AAT Level 4 (Level 8 in Scotland)
Hello can someone please explain to me what alloted share capital and paid up share capital is? Say for example 3 people set up a company and they all put 1,000 into it each, is the alloted share capital 3000? but they may have only paid half up front therefore the paid up share capital is only 1500? If they traded for say 10 years as a private ltd company but the business was then valued at 50,000.00 could they then float it on the stockmarket and the alloted share capital would be 50,000? Or does it remain as 3000?

Any help is greatly appreciated

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  • karenv
    karenv Registered Posts: 114 Dedicated contributor 🦉
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    My understanding is that Authorised share capital is the maximum amout of share capital that the company has the power to issue.

    Called up share capital is the amount the company has requested money for from its shareholders

    The paid up share capital is the amount of called up share capital that the company has actually recieved the money for.

    Hope this helps.
  • lgarside
    lgarside Registered Posts: 122 Dedicated contributor 🦉
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    shares please help

    Thanks Karen. is allotted and authorised share capital the same thing?

    Does called up share capital include the initial amount the directors put in at the begining when you start a company or is it just the amount of the authorised share capital you have issued to people?

    Also can you please tell me what the authorised share capital consists of? Am I right in thinking it's the initial capital put in by the directors and any retained profits over the years and tangible assets? Can it comprise of goodwill?
  • karenv
    karenv Registered Posts: 114 Dedicated contributor 🦉
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    I think the allotted share capital is the amount of shares actually issued to shareholders. Which may be less than the authorised share capital ( the maximum amount the company can issue).

    The proprietors capital in the company is called up share capital.

    Authorised share capital is the amount set out in the companys memorandum of association.

    This may explain things better
    http://www.companieshouse.gov.uk/about/pdf/gba6.pdf
  • lgarside
    lgarside Registered Posts: 122 Dedicated contributor 🦉
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    shares please help...

    Thanks that's brilliant, makes a bit more sense now. SO the authorised share capital isn't really based on anything except that they decide from the outset when they set up company what the amount will be that they can issue?

    Do you know why they have to have a limit? Surely they can authorise as much as they like as it will be revenue into the company?
  • karenv
    karenv Registered Posts: 114 Dedicated contributor 🦉
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    Youve got it.

    There are no limits on the amount of share capital the company can issue. It just has to set itself a limit when the company is formed. This can be changed by passing a resolution.
    I think these are rules laid down in the companies act.
  • lgarside
    lgarside Registered Posts: 122 Dedicated contributor 🦉
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    shares help please!!!!!

    Thanks so what happens if say 5 directors put 1,000 in each and the authorised share capital is 50,000.00, all 5 directors buy a 1.00 share so they all have 1/5 share in the profits. If a director levaes and sells his 1.0 share what happens to the 1,000 he put in in the first place.

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