DIFFERENCE BETWEEN PAID UP AND ISSUED SHARE CAPITAL

Hello there!!!!!!

I am back again with another interesting piece. I know this has always been on your mind. So I am hear to help you out with this article. This is very long read but trust me, it is worth it...

Recall that last week, there were about 2 publications from the Corporate Affairs Commission. The publications came out precisely on the 5th of December, 2023.

One of the publications was on the PUBLICATION OF NAMES OF COMPANIES TO BE STRUCK OFF THE REGISTER OF COMPANIES. Which in summary stated that the names of companies that would be struck off the Register of Companies was ready publication in accordance with the provisions of Section 692 of the Companies and Allied Matters Act. "I would write a separate article on this later"

The second publication was on the THE INCREMENT OF THE MINIMUM PAID UP CAPITAL FOR COMPANIES WITH FOREIGN PARTICIPATION. Which in summary stated that the Minimum paid-up capital of companies with foreign participation would had now increased from 10,000,000 share capital to 100,000,000 share capital. This was based on the Federal Ministry of Interior handbook on Expatriate Quota Administration 2022 revised edition.

What this publication was saying is that the minimum paid up share capital for a company with a Non-Nigerian director or shareholder which was previously stated as 10,000,000 share capital have now be revised/increased to 100,000,000 share capital.

Also, the Corporate Affairs Commission requires that any company with foreign participation with a share capital of less than 100,000,000 share capital should comply with the new regulation and increase their paid-up share capital to 100,000,000 within a 6-month period. Technically from 5th December 2023 to 4th June 2024.

Further, the CAC stated that Failure to do so will lead to CAC commencing a compulsory winding-up of the company. That is forcefully stopping your company from continuing its business operations.

However on the 6th of December 2023, the CAC posted an update on their social media handle (Instagram precisely) which somehow amended their previous post and public notice on the increment of the minimum share capital for companies with foreign participation.

The Publication stated that the public should disregard the previous publication and stated that "the initial notice with reference to paid-up capital rather than issued capital...…" . They promised to issue an amended notice soon which we are still expecting.

Now I don't want to dive deep into the publications but the questions I believe you are asking yourself since that date. What exactly is the difference between issued share capital and paid-up share capital.

ISSUED SHARE CAPITAL: This is the total amount of shares that have been given to shareholders. At this stage, they have not paid for the shares. The shares has just be issued to them.

PAID-UP SHARE CAPITAL: This is the amount of issued share capital that has already been fully paid for. At this stage, the shareholders have fully paid for the shares.

At the stage of incorporating a company, it is not compulsory that the issued share capital has been fully paid for. At that stage, the share capital will just be issued to the shareholders according to agreement between them. This does not mean that they must have paid the money or own the money.

The issue of paid-up share capital would now become an issue or a pre-requisite for some businesses especially businesses that required a license to operate. In that situation, before the license would be granted, the regulatory body or commission granting the license would confirm that the minimum issued share capital has been fully paid for before the license could be granted. This could be inform of escrowing that amount or providing the company bank statements showing the required amount.

This is what I think would happen eventually. The CAC might issue a notice to change the "paid-up share capital" to "issued share capital" and then allow the Federal Ministry of Interior handle the paid-up share capital compliance for this companies.

I believe I have been able to help you understand the difference between these two share capital and also when you need each of them.

If you have a contrary opinion, please drop it respectfully in the comment section.

After all, we learn everyday....

My name is Omolayo Olorunsola and I still remain your Business Legal Formation expert...