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What is the meaning of paid up capital?
Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. Paid-up capital is created when a company sells its shares on the primary market directly to investors, usually through an initial public offering (IPO).
How do we calculate paid up capital?
Paid-in capital formula It’s pretty easy to calculate the paid-in capital from a company’s balance sheet. The formula is: Stockholders’ equity-retained earnings + treasury stock = Paid-in capital.
What is the difference between capital and paid up capital?
Authorized capital is the maximum value of the shares that a company is legally authorized to issue to the shareholders. Whereas, paid-up capital is the amount that is actually paid by the shareholders to the company.
It is the amount of money for which shares of the Company were issued to the shareholders and payment was made by the shareholders. At any point of time, paid-up capital will be less than or equal to authorised share capital and the Company cannot issue shares beyond the authorised share capital of the Company.
Why paid up capital is important?
Paid-up capital is important because it’s capital that is not borrowed. A company that is fully paid-up has sold all available shares and thus cannot increase its capital unless it borrows money by taking on debt. In other words, the authorized share capital represents the upward bound on possible paid-up capital.
What is paid up capital example?
Definition: The Paid-up Capital refers to the amount that has been received by the company through the issue of shares to the shareholders. For Example, A firm has an authorized capital of Rs 10,000,000, where the value of each share is Rs 10. …
How does paid capital work?
Paid-In Capital FAQs Paid-in capital is the total amount received from the issuance of common or preferred stock. It is calculated by adding the par value of the issued shares with the amounts received in excess of the shares’ par value.
Can paid up capital be zero?
Paid up capital is no more a mandatory condition for the incorporation of a private limited company in the country. However, the Companies Amendment Act, 2015 relaxed the minimum paid up capital requirement, but it was not made zero paid up capital and the submission of stamp duty was necessary.
Why is paid up capital important?
Can I withdraw the paid up capital?
Once the money is injected into your company as paid-up capital, the money no longer belongs to you but to the company. You will be able to use it only for valid business needs of the company. You cannot withdraw it for non-company expenses.
The CAMA 1990 set the minimum authorized share capital for private and public companies at N10,000 (Ten Thousand Naira) and N500,000 (Five Hundred Thousand Naira) respectively[2] and allowed companies to issue at least 25% of their share capital while reserving the remainder for future allotment.
Can paid-in capital be withdrawn?
An organization can retire (withdraw) some of the treasury shares and this is another method to remove the treasury stock rather the company reissues it, withdrawal of treasury shares decreases the balance related to paid-in capital, overall par value or extra paid-in capital as it is applicable to many withdrawn …