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Paid up share capital is that part of called up share capital which has been fully paid up by investors. Generally a company does not obtain full amount of called up share capital because of some defaulters. Defaulters are those investors who fail to pay the amount of share they have subscribed for.

So, paid up share capital is simply the difference between called up share capital and call in arrears. In other words, the amount of called up share capital which has been received by the company is known as paid up share capital.

Paid up share capital = Called up capital – Calls in arrears.

Example of paid up share capital:

Lets assume that ABC ltd. got registered with a capital of Rs 1,00,00,000 (1 crore) divided into shares of Rs 10 each. The management decides to issue 8,00,000 (8 lakh) shares to raise a fund of Rs 80,00,000 (80 lakh) but the investors subscribe for only 6,00,000 (6 lakh) shares. Now the company calls for only Rs 4 per share out of Rs 10 (Nominal value of shares) and it gets full amount for only 5,50,000 (5 lakh 50 thousand) shares.

Then, paid up share capital is:

Paid up capital = 24,00,000 – 2,00,000 = 22,00,000.

Par value also known as nominal value or face value refers to the stated or printed value of an asset or security. It can be different from issue price if the security is issued at a discount or premium.

For example company XYZ ltd issues 1,00,000 shares of face value INR 10 each at a discount of 20% to raise fund of INR 8,00,000. In this case, par value is INR 10 however shares are issued at INR 8 (discounted value).

XYZ ltd further issues 1,00,000 shares of face value INR 10 each at a premium of 15% to raise capital of INR 11,50,000. In this case, par value is INR 10 however shares are issued at INR 11.5 with 15% premium.

It may also be different from the market value of an asset or security as market value keeps fluctuating.

If market value of share for XYZ ltd increased by 12%, then the market value of each share will be INR 11.2 however par value will remain same i.e. INR 10.

 

Preference shares are source of raising funds by a company. Preference share represents that portion of company’s total share capital which is contributed by preference shareholders. The rate of dividend on these shares is fixed and holders of these shares don’t have any voting right in the affairs of a company. Preference shareholders are given priority before equity shareholders at the time of liquidation.

A share refers to a portion of total share capital issued by a company. It represents ownership right in the company. Company’s share capital consists of equal proportion and each proportion is called a share. Dividend is paid on these shares. Shares can be classified as equity shares and preference shares. Share is also known as stock.