What does paid-up capital mean to a virtual business?

Paid-up capital refers to the amount shareholders have paid to the virtual business ("VB") for their shares. It is the amount of capital "paid-in" by investors during ordinary or preferred stock issuances, including the share price per share plus amounts in excess of share price per share value. Paid-up capital represents the funds raised by the virtual business through selling its equity and not from ongoing business operations.

What does paid-up capital mean to your virtual business?

It is the amount received by the virtual business from selling its ordinary or preference shares.

Virtual business paid-up capital example

Virtual business ("VB") ABC is a consulting business. It requires SGD 5,000 to start the business as working capital. It issues 5,000 shares at SGD 1 each to its shareholders. This brings the issued ("authorised") share capital to SGD 5,000.

However, the shareholders have only paid up 50% of their shareholding, which means that the paid-up capital is SGD 2,500 and the unpaid share capital is SGD 2,500. The total share capital is still SGD 5,000.

If the shareholders pay the remainder 50% of their shareholding, then VB ABC's paid-up capital will be SGD 5,000 and the unpaid share capital will be $0. The total share capital is still SGD 5,000. If VB ABC issues new shares in future, the amount of total share capital and paid-up capital will increase accordingly.

Other important points about paid-up capital

  • It must be received by incoming or appointed shareholders.
  • It cannot be reduced after shares are issued to appointed shareholders.