Are Shares Paid or Unpaid?

Shares can be paid, unpaid or partly paid. It is important that this is established at the time of incorporation/ issue. 

Paid - The shareholders have fully paid the company for their shares.
Unpaid - The shareholders have not paid the company for their shares.
Partly Paid - The company receives some contribution for the shares but less than the nominal value, the remaining can be called upon at a later stage. 

The shares issued at incorporation are generally ones that are required to be paid. So if you have decided to issue 100 shares at £1 each, the company should obtain £100 from the shareholders of the company. 

Shareholders Rights

Shareholders rights will be stipulated within the Articles of Association for the company upon formation (This can be amended at a later stage but we would recommend you speak to a business advisor prior to making any decisions to update this document). Unless the articles specifically state otherwise, the rights of the shareholders will not vary on voting, ability to receive dividends and the ability to trade their shares. 

"Not yet paid for" Vs. Unpaid Shares

There is a difference between unpaid shares and shares that have been issued as fully paid at the time of incorporation but are yet to physically be paid. This is very common, especially because at the time of incorporation the business would not have a bank account set up so would have no real means of receiving the payment for any shares issued. 

Unpaid shares means no consideration (payment) has been made upon issue but the company can later call on this payment and the shareholder will have to settle this either in full or in installments depending on the company's demand. 

Payment of Shares

An extract of Section 583 of the Companies Act 2006 can be found below:
"A share in a company is deemed paid up (as to its nominal value or any premium on it) in cash, or allotted for cash, if the consideration received for the allotment or payment up is a cash consideration.

A “cash consideration” means—

(a)cash received by the company,

(b)a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid,

(c)a release of a liability of the company for a liquidated sum,

(d)an undertaking to pay cash to the company at a future date, or

(e)payment by any other means giving rise to a present or future entitlement (of the company or a person acting on the company's behalf) to a payment, or credit equivalent to payment, in cash."

Shares are usually paid by bank transfer, if they are paid at all, but the above provides many options for this to be made.