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Paying For Shares

 

When a company issues shares, either to subscribers on incorporation or subsequently, the persons receiving this equity are usually required to pay the company for the shares they have been given.

The consideration given in exchange for its shares is usually cash. i.e, money is paid in to the company's bank account.

In other instances, the consideration might be in other forms:

  • Shares - Where company A and company B agree to exchange equity in one another.
  • Services - A person or another company may accept payment for their services in the form of shares.
  • Discharge of a debt - A lender may agree to exchange their loan in a company for some of its shares.

In all cases above, it would be necessary for an accurate valuation of the company's shares to be taken so that the appropriate number can be issued.

Of a company's share capital, it is possible for there to be three states to exit regarding payment for those shares:

  • Fully paid-up shares
  • Partly paid-up shares
  • unpaid shares

It is possible to have all three states existing within the same company at any given time. Some shareholders may choose or be required to pay for their shares immediately upon allocation, whist others mightdo so in instalments. There might also be certain holders (often the subscribers) may not pay for any of their shares.

The latter situation is more common in smaller business entities than in larger listed public limited companies.

 
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