Loading the player...
A:

In accounting, share capital is the sum of the par value of all issued shares. There are various other non-accounting uses of the term "share capital," some of which are identical to paid-up capital. Issued share capital and paid-up capital are the total amount of capital funded by a company's shareholders. Authorized share capital, on the other hand, is the maximum capital that a company is allowed to raise through the sale of its shares.

Authorized Share Capital Vs. Paid-Up Capital

Before a publicly traded company can sell stock, it must specify a certain limit to the amount of share capital that it is authorized to raise. This limit is set forth in its constitutional documents and can only be changed with the approval of the shareholders. This is sometimes known as the authorized share capital.

A company does not usually issue the full amount of its authorized share capital. Instead, some will be held in reserve by the company for possible future use. The amount that is issued is called the paid-up capital.

Paid-up capital can never exceed authorized share capital. In other words, the authorized share capital represents the upward bound on possible paid-up capital. In terms of investing or immediate business finance decisions, paid-up capital is generally more important.

Finding Authorized Vs. Paid-Up Capital

The amount of authorized share capital must be listed in the company's founding documents. Any time the authorized share capital changes, these changes must be documented and made public.

Paid-up capital can be found or calculated in the company's financial statements. The SEC requires publicly traded companies to disclose all sources of funding to the public.

RELATED FAQS
  1. How does monetary policy influence the Fisher effect?

    Find out if paid-up capital generated by the sale of stock has to be repaid by the issuing company and how these funds are ... Read Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    Find out about the difference between called-up and paid-up share capital, including an explanation of the four categories ... Read Answer >>
  3. What is the difference between financial capital and economic capital?

    Read about the differences between types of financial capital, which companies use to raise money, and economic capital models ... Read Answer >>
  4. What role do shareholders play in a capital budget?

    Learn about why shareholders play an integral role in capital budgeting and how it benefits businesses to use equity capital ... Read Answer >>
  5. What is authorized stock?

    Authorized stock represents the maximum number of common shares that can be issued legally by the company as stated in the ... Read Answer >>
  6. How is working capital different from fixed capital?

    Understand the differences between working capital and fixed capital, including definitions and examples of how businesses ... Read Answer >>
Related Articles
  1. Investing

    Paid-Up Capital

    Paid-Up Capital is listed in the equity section of the balance sheet. It represents the amount of money shareholders have paid into the company by purchasing shares. It’s essentially two accounts, ...
  2. Small Business

    Understanding Capital

    Capital has a variety of meanings, but it generally refers to financial resources.
  3. Managing Wealth

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.
  4. Small Business

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  5. Investing

    American Capital Sells Itself to 2 Companies

    Prominent business development company American Capital (NASDAQ: ACAS) is soon to be no more. The company has agreed to sell its assets to a pair of peers, fellow BDC Ares Capital (NASDAQ: ARCC) ...
  6. Small Business

    Understanding Capital Investment

    Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business.
  7. Insights

    What's Economic Capital?

    While regulatory and economic capital use some of the same measurements of risk to determine how much capital a firm should hold in reserve, economic capital uses more realistic measures.
  8. Investing

    Explaining Capital Employed

    Generally, capital employed refers to all of the assets used in a business that contribute to the company’s ability to earn revenue.
  9. Investing

    5 Central Banks That Are Publicly Traded

    Learn about five central banks that have publicly traded shares. Explore shareholder voting and dividend rights for public and private holders.
  10. Investing

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
RELATED TERMS
  1. Paid-Up Capital

    The amount of a company's capital that has been funded by shareholders. ...
  2. Authorized Share Capital

    The number of stock units that a publicly traded company can ...
  3. Paid-Up

    The state of a settlement when all payment obligations for a ...
  4. Capital Investment

    Funds invested in a firm or enterprise for the purposes of furthering ...
  5. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
  6. Authorized Stock

    The maximum number of shares that a corporation is legally permitted ...
Hot Definitions
  1. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  2. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  3. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  4. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  5. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  6. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
Trading Center