A share is partly paid when the shareholder has agreed to pay its nominal value (and any premium) but has not yet paid all of it. The unpaid amount is a debt the shareholder owes the company, which the directors can call for under the articles or the terms of issue, and which a liquidator can collect if the company is wound up. Private companies using the model articles cannot issue partly paid shares at all, while a public company must have at least one quarter of the nominal value and all of any premium paid on allotment.

What does “partly paid” actually mean?

Every share has a nominal value and may be issued at a premium above it. The shareholder’s liability is to pay the full issue price. If only part has been paid, the balance is “unpaid share capital”. Section 3(2) of the Companies Act 2006 defines a company limited by shares as one where members’ liability is limited “to the amount, if any, unpaid on the shares held by them”. So limited liability does not mean no liability: it means liability capped at whatever is still owed on the shares.

The Act also distinguishes called up and uncalled capital. Under section 547, called up share capital is the total of calls made (whether or not paid), plus capital paid up without a call and any capital payable on a fixed future date under the articles or the terms of allotment. Anything else still owed is uncalled share capital.

Partly paid is not the same as issuing at a discount. Section 580 prohibits allotting shares at a discount; a partly paid share is still issued at full value, with part of the price deferred.

Can a private company issue partly paid shares?

The Companies Act sets no minimum payment for private companies, but the articles usually do. Article 21 of the model articles for private companies limited by shares says no share is to be issued for less than the aggregate of its nominal value and any premium, except shares taken by the subscribers on formation. That exception is why many small companies show subscriber shares as unpaid on the register years after incorporation.

A private company on the model articles that wants to issue partly paid shares later must first amend its articles, which under section 21 requires a special resolution. The terms on which the balance is payable (on demand, on a fixed date or on an event) should then be set out in the allotment resolution or subscription letter. For the wider allotment process, see how to allot new shares.

What extra rules apply to public companies?

  • One quarter minimum: section 586 says a public company must not allot a share unless at least one quarter of its nominal value and the whole of any premium is paid up, except for shares allotted under an employees’ share scheme.
  • Breach: if it does, the share is treated as if one quarter and the premium had been received, and the allottee must pay the shortfall with interest (section 586(3)).
  • Later holders: under section 588, a subsequent holder can be jointly and severally liable for that shortfall unless they bought for value without actual notice of the breach, or took title from such a person.
  • Authorised minimum: a public company needs allotted share capital with a nominal value of at least £50,000 (section 763) before it receives a trading certificate under section 761, so at least £12,500 of that must be paid up.

How are calls made and enforced?

Calls are a matter for the articles. The model articles for public companies (Schedule 3 to SI 2008/3229) contain a full procedure, which many private companies copy when they adopt partly paid shares:

  1. Call notice: the directors send a notice requiring payment of a sum not exceeding the amount unpaid, stating when and how it is to be paid (article 54). No member has to pay before 14 days have passed since the notice was sent.
  2. Fixed sums: amounts payable on allotment, on an event or on a fixed date under the terms of issue need no call notice; non payment is treated as failure to comply with a call (article 56).
  3. Interest: an unpaid call carries interest from the payment date at the rate in the terms of issue or call notice, or 5% a year if none is set, capped at 5 percentage points above Bank Rate (article 57).
  4. Forfeiture: a notice of intended forfeiture must give at least 14 days to pay (article 58). If it is ignored, the directors can forfeit the shares (article 59). The former holder ceases to be a member but remains liable for the sums due at forfeiture (article 60).

Two other points catch people out. Transferring the shares does not extinguish or transfer liability for a call already made (article 55), and the company has a lien over every partly paid share for the unpaid amount, ranking ahead of third party interests and extending to dividends on that share (article 52).

What happens to unpaid capital if the company fails?

On a winding up, section 74 of the Insolvency Act 1986 makes present and past members contributories, but for a company limited by shares no member has to contribute more than the amount unpaid on their shares. A past member is only liable if they ceased to be a member less than a year before the winding up began, only for debts contracted while they were a member, and only if existing members cannot pay. In a voluntary winding up the liquidator can exercise the court’s power to make calls (section 165(4)); in a compulsory liquidation the court can make calls under section 150.

This is why unpaid capital is valuable to creditors and why releasing it is restricted. Section 641(4)(a) treats extinguishing or reducing the liability on shares for capital not paid up as a reduction of share capital, which needs a special resolution supported by a solvency statement or confirmed by the court. See reduction of share capital.

How do partly paid shares affect dividends, filings and the accounts?

Dividends. Under article 71 of the public company model articles, dividends are paid according to the amounts paid up on the shares, and amounts paid in advance of a call are ignored. The private company model articles have no equivalent: article 30(4) pays by reference to each shareholder’s holding, so a partly paid private share takes the same dividend as a fully paid one unless its terms of issue say otherwise.

Companies House. The statement of capital on a return of allotment (section 555(4)) must show the aggregate amount unpaid on the shares, whether on nominal value or premium. The same disclosure applies to the statement of capital on a subdivision, consolidation or redemption.

Accounts. The balance sheet formats in Schedule 1 to SI 2008/409 include “Called up share capital not paid” as item A, or within debtors. Only called up amounts are recognised; uncalled capital is not an asset of the company until called.

Buybacks and redemptions. A company can only redeem or buy back shares that are fully paid (sections 686 and 691), so any unpaid balance must be settled first. See company share buybacks.

Is there a tax charge when employees hold partly paid shares?

Yes, potentially. Chapter 3C of Part 7 of ITEPA 2003 applies where an employee acquires employment related securities for less than market value, and for shares that are not fully paid the comparison is with their fully paid market value (section 446Q(3)). Section 446S treats the unpaid amount as an interest free “notional loan” from the employer, taxed under the beneficial loan rules, including the £10,000 threshold in section 180. If the liability to pay is later released or the shares are sold without paying up, section 446U(2) treats the outstanding notional loan as employment income in that tax year. See employment related securities basics.

How does this work in practice?

Illustration only. A private company amends its articles and allots 10,000 shares of £5 nominal value each at par to a new investor, with £1 a share payable on allotment and £4 a share payable on call. The investor pays £10,000. Called up share capital is £10,000 and, because the balance is payable only on call, the remaining £40,000 is uncalled and does not appear as an asset. The SH01 statement of capital shows aggregate nominal value of £50,000 and £40,000 unpaid. A year later the directors call £2 a share: called up share capital rises to £30,000, and £20,000 is shown as called up share capital not paid until the investor settles. If the investor sells the shares in the meantime, they remain liable for that call.

What mistakes come up most often?

  • Issuing partly paid shares while the model articles still require full payment.
  • Showing shares as fully paid on the SH01 or confirmation statement when cash has not been received.
  • Quietly “writing off” unpaid capital in the books without the reduction of capital procedure, and without considering the employment income charge for employee shareholders.
  • Assuming a partly paid private company share only receives a proportionate dividend when the articles say otherwise.
  • Trying to redeem or buy back shares before they are fully paid.

Rights attached to shares, including payment terms, can also differ by class: see different classes of shares.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.