Loading the player...
A:

In accounting, share capital is the sum of the par value of all issued shares. However, there are various 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 Securities and Exchange Commission (SEC) requires publicly traded companies to disclose all sources of funding to the public.

Read The Basics of Outstanding Shares and the Float, Difference Between Issued and Subscribed Share Capital, Difference Between Paid-Up and Called-Up Share Capital, and Difference Between Authorized and Outstanding Shares.

RELATED FAQS
  1. 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 >>
  2. Issued Share Capital vs. Subscribed Share Capital

    Subscribed share capital and issued share capital have numerous differences. Read Answer >>
  3. What types of capital are not considered share capital?

    Find out what types of capital are not considered share capital, including an explanation of the different types of share ... Read Answer >>
  4. Why is the value of capital stock important to public shareholders?

    Understand what capital stock is and how it's issued and authorized. Learn why the value of capital stock important to public ... Read Answer >>
  5. How does total capital investment influence economic growth?

    Discover the basic relationship between capital investment and economic growth, and why improving the capital structure increases ... Read Answer >>
  6. 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 >>
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. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  4. 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.
  5. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  6. 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.
  7. 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.
  8. 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.
  9. Investing

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  10. Investing

    Advantages of Maintaining Low Working Capital

    Understand the benefits and advantages of maintaining low working capital as related to liquidity needs, capital allocation and operational efficiency.
RELATED TERMS
  1. Paid-Up Additional Insurance

    Additional whole life insurance that a policyholder purchases ...
  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. Capitalization Of Profits

    Converting a company's retained earnings, which represent the ...
  5. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
  6. Capital Tax

    A tax on a corporation's taxable capital, comprising capital ...
Hot Definitions
  1. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. ...
  2. Current Assets

    A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  4. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  5. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
Trading Center