What is a share capital account?

A share capital account consists of the amount paid for the par value (ie the value allocated to the shares by the company on foundation) of the shares issued by the company to form its capital. It is possible for the share capital account to exceed the nominal value of the number of shares multiplied by their par value where other funds, such as capitalised profits, are transferred to the account.

Does ‘share capital’ include amounts that are unpaid on shares?

Yes. ‘Share capital’ includes amounts of ‘share capital’ that have been paid or credited as paid to the company for the issue of shares (paid-up share capital) and amounts that have not been paid or credited as paid to the company but which represent presently existing liabilities owed by members in respect of issued shares (unpaid capital).

Are premiums received by a company in return for it issuing options share capital?

No. Premiums received by a company in return for the issue by the company of options over its shares are not amounts of share capital. This is because the premiums received are not amounts received by the company from an entity in return for the issue of shares to that entity.

Will a company raise share capital if it issues shares in exchange for property or services provided to the company?

Yes. The consideration required for an issue of shares does not have to be provided in a cash form. For example, a company which issues shares in return for the transfer of property or for the provision of services will be taken to have received money’s worth for the issue of shares. The amount of share capital will be the value of the property or services provided to the company.

What is the significance of the name given to an account in determining whether the account is (or is part of) a company’s share capital account?

Whether an account of the company is a share capital account (or part of a share capital account) will depend on whether it is an account of ‘share capital’ or, if the account was created after 1 July 1998, whether it is an account to which the first amount credited was an amount of ‘share capital’.

The name given to an account will not determine whether the account is, (or is part of), the share capital account and not all items of shareholder’s equity will constitute share capital.

If you have any questions on the share capital account for your business, please contact this office.