The Short Answer
Called up share capital not paid is the money your shareholders owe the company for shares they have been issued but have not paid for yet.
It is an asset. The company is owed something, so it goes on the asset side of the balance sheet, right at the top, above fixed assets.
For the overwhelming majority of small UK companies the correct figure is zero, because the founder paid their pound. If the figure is not zero, that is not a formatting quirk. It is a debt owed to the company by a named individual, it is visible on the public register, and in a bad year it is the amount a liquidator can demand from that person's own bank account.
That last point is the reason this page exists. The current search results for this term are a 2022 accountancy forum thread, a software help page and an American definition. All of them tell you what the words mean. None of them tell you what happens next.
Five Words That Get Used As If They Mean The Same Thing
Almost every mistake here comes from the vocabulary. UK company law uses five terms and they describe five different stages of the same pound.
Nominal value is the face value written on the share. A £1 ordinary share has a nominal value of £1. This has nothing to do with what the share is worth. A share in a company worth £2 million can still have a nominal value of £1.
Allotted or issued means the share now exists and belongs to somebody. The register of members has their name against it.
Called up means the company has asked for the money, or the terms of issue say it is due. Most small companies call up the full amount at the moment of issue, which is why the two figures are usually identical.
Paid up means the money actually arrived.
Uncalled is share capital the company has not asked for yet. It is a reserve of potential funding, and it is rare outside of specific structures.
Called up share capital not paid is the gap between the fourth word and the third. The company has asked, and the shareholder has not paid.
Where It Sits, And The Second Place The Law Lets You Put It
Format 1 of the statutory balance sheet, set out in Schedule 1 to the Small Companies and Groups (Accounts and Directors' Report) Regulations 2008, starts like this:
- A. Called up share capital not paid
- B. Fixed assets
- C. Current assets
It is item A. Before fixed assets, before stock, before cash. The single most confusing item on the whole document is given first billing, which is a large part of why so many directors get it wrong.
Note 1 to the formats then allows the same figure to be shown inside debtors instead, at item C.II.3, which is where it arguably belongs in plain accounting terms. It is money owed to the company by a person, which is the definition of a trade or other debtor. Both presentations are legal. Filing software almost always uses item A, so that is what you will see.
The one thing that never changes is which side of the balance sheet it sits on. It is an asset. Called up share capital, the ordinary kind, sits in capital and reserves at the bottom as part of equity. Same words, opposite ends of the page. Software puts them a screen apart and people fill in both boxes with the same number without noticing they are recording two different things.
The Normal £1 Company, Done Correctly
A company is formed with one ordinary share of £1, held by the founder.
If the founder paid the pound into the company's bank account:
- Called up share capital not paid: £0
- Cash at bank and in hand: £1
- Net assets: £1
- Capital and reserves, called up share capital: £1
If the founder never paid it:
- Called up share capital not paid: £1
- Cash at bank and in hand: £0
- Net assets: £1
- Capital and reserves, called up share capital: £1
Either way the balance sheet totals £1, because the accounting equation does not care whether the asset is cash or a promise. The share capital was issued and it created a matching asset. What the asset is made of is the only thing that changed.
The classic error is entering £1 in both the cash box and the not paid box, which reports net assets of £2 against share capital of £1. That does not balance, and it is by some distance the most common reason a first dormant filing gets rejected.
On the Companies House dormant accounts route, form AA02, the logic is exactly the same and the guidance is one sentence long: whatever has been paid goes in cash at bank and in hand, whatever has not goes in called up share capital not paid. If the shares were partly paid, split the figure between the two.
Why This Is Not A Bookkeeping Detail
Here is what the definitional pages leave out.
Section 3(2) of the Companies Act 2006 says a company is limited by shares when the members' liability is limited to "the amount, if any, unpaid on the shares held by them".
Read that again with the emphasis where it belongs. Limited liability is not a fixed shield. It is a shield with a hole in it exactly the size of your unpaid share capital.
Section 74(2)(d) of the Insolvency Act 1986 then makes it operational. In a winding up, no contribution can be demanded from a member "exceeding the amount (if any) unpaid on the shares in respect of which he is liable". The word doing the work in that sentence is not "exceeding". It is the quiet confirmation that anything up to that amount can be demanded, and a liquidator has both the standing and the commercial motive to demand it.
So consider two companies that look identical from the outside.
Company A issues 100,000 ordinary shares of £1 each to its founder. Nobody pays anything. Called up share capital not paid on the balance sheet: £100,000. Two years later the company fails owing £140,000 to trade creditors and HMRC. The liquidator reviews the statement of capital, sees £100,000 outstanding, and calls it in from the founder personally. There is no defence. It is a debt the founder agreed to when the shares were issued.
Company B issues 100,000 ordinary shares of £0.01 each to its founder, who pays the full £1,000. Same 100,000 shares, same 100 per cent ownership, same voting rights, same dividend rights. Called up share capital not paid: nil. When the company fails, the founder's exposure is zero.
The two companies have identical share registers and completely different downside. The only difference is a decision made in about four seconds on the incorporation form, usually by picking a number that looked serious.
Our view, plainly: nominal share capital is not a measure of ambition, it is a personal liability ceiling. Choose a small number and pay it. If you want the company to hold £100,000, lend it £100,000 through a director's loan account or subscribe for shares at a premium, where £999 of every £1,000 sits in the share premium account rather than in nominal capital. Both routes get the money into the business. Neither one leaves you with a signed commitment to pay it again.
Unpaid Shares Quietly Destroy SEIS And EIS Relief
This is the expensive one, and we almost never see it mentioned on pages about this topic.
For SEIS, section 257CA(4) of the Income Tax Act 2007 requires that the shares "are subscribed for wholly in cash, and are fully paid up at the time they are issued". Section 173(3) imposes word for word the same test for EIS.
There is no softening of it. Not paid within thirty days. Not paid before the year end. Paid up at the time of issue.
Section 257CA(5) goes further and treats shares as not fully paid if there is any undertaking to pay cash to somebody else at a later date in connection with the acquisition. That closes the obvious workaround.
The practical failure looks like this. A founder incorporates, leaves the subscriber share unpaid because it seemed like a technicality, then raises a proper SEIS round eighteen months later. The new investor shares are paid properly, so the round itself is usually fine. But when the paperwork is reviewed, the founder's own holding turns out to be part of an issue that was never paid up, and questions start being asked about the share history at exactly the moment nobody wants them.
The worse version is a round where the company issues investor shares first and collects the money afterwards, because the timing worked better for everybody. Those shares were not fully paid up at the time of issue. The relief on that issue is gone, and the investors, who did nothing wrong, are the ones who lose it.
If there is any prospect of SEIS or EIS money, pay for every share on the day it is issued and keep the bank statement.
Paying For Your Shares Does Not End Dormancy
A belief we run into constantly: directors leave the £1 unpaid on purpose, because they think paying money into the company would count as a transaction and break its dormant status.
It does not. Section 1169(3)(a) of the Companies Act 2006 disregards "any transaction arising from the taking of shares in the company by a subscriber to the memorandum" when deciding whether a company is dormant. The same subsection also disregards Companies House fees for a change of name, re-registration, late filing penalties and the confirmation statement.
So a subscriber can pay for their shares, the company can pay its Companies House fees, and it stays dormant. The register is carrying a large number of dormant companies with an unpaid pound sitting at item A for no reason other than a misunderstanding of that one subsection.
If your company is dormant and the share capital is unpaid, you can simply pay it. It changes nothing about your filing obligations and it removes the outstanding liability.
You Cannot Just Decide To Ignore It
Once shares are issued unpaid, the obligation belongs to the company, and directors cannot informally let it go.
Section 580 of the Companies Act 2006 bans allotting shares at a discount, and if it happens the allottee "is liable to pay the company an amount equal to the amount of the discount, with interest". Issuing a £1 share for nothing and then quietly agreeing it will never be paid is, in substance, exactly that.
The legitimate route is a reduction of capital. Section 641(4) lets a company reduce its share capital by extinguishing or reducing the liability on shares in respect of capital not paid up, and for a private company that means a special resolution supported by a solvency statement under sections 642 to 644. It is a real process with real paperwork and a real declaration from the directors about solvency.
Compare that to the alternative, which is transferring £1. This is the whole argument for dealing with it now.
It Is On The Public Record
Since 2016 the statement of capital has had to show, for each class of share, "the aggregate amount (if any) to be unpaid on those shares (whether on account of their nominal value or by way of premium)". Section 10 of the Companies Act 2006 covers it at incorporation, and the same information is refreshed through the confirmation statement.
Anyone can look it up in about twenty seconds and see, for free, that your shareholders owe the company money.
Credit reference agencies read the statement of capital. So do the finance teams of large customers running supplier checks, and so do lenders. A company with £100,000 of unpaid share capital is telling every one of them that its stated capital was never actually funded. That is not a fatal signal, but it is an unnecessary one, and it is being sent by a company that in most cases never intended to send it.
Public Companies Are Not Given The Choice
Everything above applies to private limited companies, where partly paid and unpaid shares are legal.
Public companies operate under a harder rule. Section 586 says a public company "must not allot a share except as paid up at least as to one-quarter of its nominal value and the whole of any premium on it", with a narrow carve out for employee share schemes. That sits alongside the £50,000 authorised minimum of allotted share capital a plc needs to trade.
The reason for the distinction is worth noticing. Where the public might buy the shares, Parliament insisted that the capital be at least partly real. Where only the founder is involved, it left the question to the founder. That is a freedom, and like most freedoms in company law it is one people use without reading what is attached to it.
How To Fix It
If the shares should have been paid and simply were not, transfer the money from the shareholder's personal account to the company's business account, with a reference that says what it is. The bookkeeping entry is to debit cash and credit called up share capital not paid, clearing the asset. Do it before the year end so this year's accounts are clean, and keep the bank statement with the incorporation documents. This is a five minute job.
If the company has no bank account, which is common with dormant companies, the shareholder can still settle it by paying an expense of the company personally. The substance is the same, and the paperwork needs to show it plainly.
If the accounts already filed show the wrong figure, in most cases the practical answer is to pay the amount now and present it correctly in the next set of accounts, with the comparative restated if the error was material. Amended accounts are available where it matters, but for a £1 subscriber share it rarely does.
If there is a large unpaid balance you never intend to collect, take advice before doing anything. That is the reduction of capital route under section 641, not a journal entry, and getting it wrong leaves the liability exactly where it was while creating an impression it had been dealt with.
Common Mistakes We See
- Entering the same figure in both the cash box and the not paid box. They are alternatives, not a pair.
- Treating it as a liability. It is an asset. The company is owed money.
- Leaving it unpaid deliberately to protect dormant status. Section 1169(3)(a) already protects it.
- Confusing nominal value with what the shares are worth. They are unrelated, and the nominal figure is what you are on the hook for.
- Issuing large round numbers of £1 shares at incorporation because 100,000 sounded better than 100.
- Posting the unpaid amount to the director's loan account. They are different balances with different legal consequences.
- Issuing shares to investors before the money clears and losing SEIS or EIS relief on the whole issue.
- Assuming a director can simply waive it. Waiving it is a reduction of capital.
How IAK Can Help
Nearly every share capital problem we are asked to unpick was created at incorporation, usually by a founder who had a company formed in ten minutes and was never asked a single question about nominal value. The fixes are cheap while the company is small and quiet, and they get progressively more awkward once there are outside shareholders, a lender or an investment round involved.
We will look at what was actually issued, what was paid, and what the public record currently says about it, then tell you whether it needs a payment, a correction in the next accounts, or a formal reduction of capital. Where a funding round is coming, we check the share history against the SEIS and EIS conditions before anybody signs, because that is the one problem on this page that cannot be fixed afterwards.
Our accounting team handles statutory accounts and the Companies House filings, including micro-entity and dormant company accounts where this figure causes most of the trouble. Our tax planning team deals with the share structure itself, alongside your dividend and director's remuneration position, and our bookkeeping and Xero teams keep the underlying records straight. We do a lot of this work with small businesses and property developers, where multiple companies and multiple share issues make the record keeping matter more than most people expect.
If you have just been handed a balance sheet with a number at item A and no explanation, get in touch for a free consultation. It is usually a short conversation and a one pound bank transfer.
Sources
- Companies Act 2006, section 3, legislation.gov.uk, on a company limited by shares being one where members' liability is limited to the amount, if any, unpaid on their shares.
- Insolvency Act 1986, section 74, legislation.gov.uk, on the liability of contributories in a winding up and the cap at the amount unpaid on shares.
- The Small Companies and Groups (Accounts and Directors' Report) Regulations 2008, Schedule 1, legislation.gov.uk, on Balance Sheet Format 1, item A being called up share capital not paid, and Note 1 permitting the alternative position within debtors.
- Companies Act 2006, section 580, legislation.gov.uk, on shares not being allotted at a discount and the allottee's liability for the discount plus interest.
- Companies Act 2006, section 586, legislation.gov.uk, on public companies allotting shares paid up as to at least a quarter of nominal value and the whole of any premium.
- Companies Act 2006, section 610, legislation.gov.uk, on the share premium account and its restricted uses.
- Companies Act 2006, section 641, legislation.gov.uk, on reducing share capital by special resolution supported by a solvency statement, including extinguishing liability on capital not paid up.
- Companies Act 2006, section 10, legislation.gov.uk, on the statement of capital and initial shareholdings, including the aggregate amount to be unpaid on shares.
- Companies Act 2006, section 1169, legislation.gov.uk, on dormant companies and the transactions disregarded, including subscriber shares and Companies House fees.
- Income Tax Act 2007, section 173, legislation.gov.uk, on EIS shares being subscribed for wholly in cash and fully paid up at the time they are issued.
- Income Tax Act 2007, section 257CA, legislation.gov.uk, on the equivalent SEIS requirement and the treatment of undertakings to pay cash at a later date.
- Dormant company accounts (AA02), Companies House registrar's rules, on the data items required on a dormant company accounts filing.