Do Shareholders Have to Pay for Their Shares in a UK Company?

Shareholders are generally responsible for paying the agreed price for their shares. However, shares in a UK private limited company may be issued as fully paid, partly paid or unpaid, depending on the company’s articles and the terms of issue.

Any unpaid amount can remain a liability of the shareholder.

What Does “Fully Paid” Mean?

Fully paid shares are shares for which the company has received the entire agreed subscription price, including:

• The nominal value; and
• Any share premium payable above the nominal value

For example, if a shareholder receives 100 shares with a nominal value of £1 each and pays £100, the shares are fully paid, assuming no premium applies.

The shareholder normally has no further payment liability relating to those shares.

What Are Partly Paid Shares?

Partly paid shares are shares where the shareholder has paid only part of the required amount.

For example:

• Nominal value: £1 per share
• Amount paid: £0.40 per share
• Amount unpaid: £0.60 per share

The company may later make a call requiring the shareholder to pay the outstanding £0.60 per share, subject to the articles and terms on which the shares were issued.

Can Shares Be Completely Unpaid?

Shares taken when a company is formed may be recorded as unpaid, depending on the incorporation arrangements and articles.

For example, a company could issue 100 shares with a nominal value of £1 each and record the entire £100 as unpaid. The shareholder would remain liable to pay that amount when properly required.

Unpaid shares should not be treated as free shares. They represent an outstanding financial obligation to the company.

When Must the Unpaid Amount Be Paid?

The timing depends on:

• The company’s articles of association
• The terms on which the shares were issued
• Any shareholders’ agreement
• A payment schedule
• A valid call made by the company
• Whether the company is being wound up

The articles may permit the directors to request payment of the unpaid amount.

What Happens if the Company Is Wound Up?

A shareholder’s liability in a company limited by shares is normally limited to the amount unpaid on their shares.

If the company is wound up, the shareholder may be required to pay the outstanding amount to help settle the company’s liabilities.

For example, someone holding 1,000 shares with £0.50 unpaid on each share could potentially be required to contribute £500.

Can a Shareholder Refuse to Pay?

A shareholder cannot normally refuse a valid payment request where the amount is legally due.

Depending on the company’s articles and terms of issue, failure to pay may result in:

• Interest being charged
• Loss of dividend or voting rights
• Legal action by the company
• Forfeiture of the shares
• The unpaid amount being recovered as a debt

The company must follow the correct procedure when making a call or forfeiting shares.

Can Shares Be Paid for With Something Other Than Cash?

In a UK private company, shares can generally be issued for:

• Cash
• Property or other assets
• Intellectual property
• Shares in another company
• Services or other agreed non-cash consideration
• A combination of cash and non-cash consideration

The company must record the consideration correctly. Non-cash arrangements may also create valuation, accounting and tax issues.

Different and more restrictive rules apply to public companies.

Can Shares Be Issued Below Their Nominal Value?

A company cannot issue shares at a genuine discount below their nominal value.

For example, a £1 share cannot be issued for a total subscription price of only £0.60. It may be issued as partly paid with £0.60 paid immediately and £0.40 remaining legally payable.

This distinction is important: partly paid does not mean the unpaid balance has been cancelled.

What Is a Share Premium?

A company may issue shares for more than their nominal value.

For example:

• Nominal value: £1
• Issue price: £5
• Share premium: £4

The full amount payable is £5. The £1 is recorded as share capital and the additional £4 is normally recorded in the company’s share-premium account.

What if a Shareholder Buys Existing Shares?

There is a difference between:

• The company issuing new shares; and
• A shareholder selling existing shares

When new shares are issued, the payment or consideration is provided to the company.

When existing shares are transferred, the buyer normally pays the selling shareholder. The company does not usually receive the purchase price.

Stamp Duty and other tax considerations may apply to a share transfer.

Must Payment Details Be Reported?

The company’s statement of capital must show information about its shares, including the amounts paid and unpaid.

The company should also maintain:

• The register of members
• Share-allotment records
• Share certificates
• Board and shareholder resolutions
• Records of payments received
• Details of non-cash consideration

If additional shares are issued, Companies House must normally be notified within one month using the appropriate allotment filing.

Do Unpaid Shares Receive Dividends?

This depends on the rights attached to the shares and the company’s articles.

Some articles may restrict dividends or voting rights on shares where payments are overdue. The company must follow the documented share rights when declaring and paying dividends.

Should a Small Company Issue Fully Paid Shares?

Fully paid shares are often simpler for a small owner-managed company because they:

• Remove future payment uncertainty
• Simplify company records
• Reduce potential shareholder disputes
• Make liability easier to understand
• Avoid complications during investment or sale checks

For example, a company might issue 100 fully paid ordinary shares with a nominal value of £1 or £0.01 each.

Final Thoughts

Shareholders generally have to provide the agreed payment or consideration for their shares. Shares may be fully paid, partly paid or unpaid, but any outstanding amount remains a liability that the company may request later.

The terms should be clearly recorded in the articles, statement of capital and share-allotment documents.

‍