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Share Capital in a new company

We have a small limited company that started this year and I am trying to pull together the YE stats. It turns out that although 600 shares issued (split between 2 directors) no funds changed hands so not paid up. Should I journal all 600 to directors loans (then negative) or what is the minimum I need to account for in accounts? Please help. 

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By charlb
17th May 2012 10:22

Book to directors loan account

And consider s455 tax charge if shares not paid up within 9 months following the end of the accounting year end.

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By Hansa
17th May 2012 12:20

but is it a director's liability?

Whilst there may be commonality of  directors and shareholders, is this relevant in terms of unpaid share capital? Why should it go to DLA as the debt has nothing to do with the directors, as directors?

I would have thought the correct treatment would be for the unpaid share capital to be shown in "other debtors".  Better still would be to collect a cheque from each shareholder! 

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The minimum amount of paid up share capital...

... that you need to have in the accounts is £0.

It's perfectly possible to have a share capital note that shows:

Authorised

1,000 shares of £1 each £1,000

Issued

600 shares of £1 each £600 (this is the balance sheet figure)

Fully Paid

0 shares of £1 each £0

The unpaid £600 would then be shown as unpaid share capital, usually in debtors (although it's not strictly a debt due to the company, unless calls have been made) or as a separate asset.

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Correct!

Steve Kesby wrote:

... that you need to have in the accounts is £0.

It's perfectly possible to have a share capital note that shows:

Authorised

1,000 shares of £1 each £1,000

Issued

600 shares of £1 each £600 (this is the balance sheet figure)

Fully Paid

0 shares of £1 each £0

The unpaid £600 would then be shown as unpaid share capital, usually in debtors (although it's not strictly a debt due to the company, unless calls have been made) or as a separate asset.

 

Have to say that Steve is spot on here. It does not need to be put into the DLA at all.

There are several companies sitting with unpaid share capital. Happens alot with dormant companies also.

 

 

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17th May 2012 14:21

Thanks

That is exactly the answer I had hoped for.

Top marks!

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17th May 2012 14:22

Shares Unpaid

Thanks that is perfect!

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By charlb
18th May 2012 08:17

Disclosure?

Thanks for clarifying this Steve. Would you also be able to expand on what, if any, disclosure is required regarding the "other debtors" figure for the unpaid share capital. Does it need to be disclosed in transactions with directors or related parties and is there a difference if a call is made or not?

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Substance v Form

Legally, I don't believe that there's a debt due on unpaid share capital that hasn't been called up. I'm not sure that actually changes if a call is made, although the shares might then be liable to forfeiture if the calls aren't paid.

From an accounts perspective though (whatever the exact legal position is), the substance is that the member has an obligation to contribute the unpaid amount at some stage, so it is appropriate to separately recognise that obligation and the equity protection it provides to the creditors separately.

The director-shareholder is definitely a related party, and FRS8 notes that an equity contribution is a transaction.  So I don't think your disclosures change at all, it's just that by transferring the obligation to DLA and recognising the shares as paid up changes the legal form from unpaid share capital to actual debt.

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Can I just clarify my understanding too then?

Hi All,

 

Sorry to sound as though I am repeating the already stated but I would like to ensure I am comfortable with this?

 

In the case of the 600 shares (@ £1 each) then am I correct in saying that:

 

a) the £600 in the debtors account would be under "Other Debtors"

and

b) the journal entry would be:

1102     Other Debtors     01/04/2012     £600.00

     3001     Unpaid Share Capital     01/04/2012      £600.00

 

Is that right??

 

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24th Dec 2013 12:06

CH New Abbreviated System

The new (2013) CH Abbreviated system does not allow blank or £0 in the Called Up Share Capital box on the Balance Sheet - the old system used to allow this.

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