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Difficulty: HardPrivate Limited Companies: Characteristics, Formation Documents, and Capital

A newly registered private limited company has an authorized share capital of 10,000,00010,000,000 ordinary shares of ₦1.00\text{₦}1.00 each. The directors issue 6,000,0006,000,000 shares to subscribers and formally request a first call payment of ₦0.50\text{₦}0.50 per share. Payments are received in full for 5,200,0005,200,000 shares, while payment for the remaining 800,000800,000 shares is still outstanding. What is the total called-up capital of the company?

  1. ₦3,000,000\text{₦}3,000,000Answer
  2. B
    ₦2,600,000\text{₦}2,600,000
  3. C
    ₦6,000,000\text{₦}6,000,000
  4. D
    ₦10,000,000\text{₦}10,000,000

Answer

The total called-up capital of the company is ₦3,000,000\text{₦}3,000,000.
Called-up capital is defined as the total face-value portion of issued share capital that a company's directors have formally requested shareholders to pay. In this scenario, the directors issued 6,000,0006,000,000 shares and called up ₦0.50\text{₦}0.50 per share, making the total called-up capital 6,000,000×₦0.50=₦3,000,0006,000,000 \times \text{₦}0.50 = \text{₦}3,000,000. Non-payment by some shareholders creates calls in arrears (₦400,000\text{₦}400,000) but does not change the amount that was called up.

Step-by-Step Solution

1
Identify the number of issued shares and the call value per share.
Issued shares = 6,000,0006,000,000; Call per share = ₦0.50\text{₦}0.50.
Called-up capital represents the portion of issued capital that shareholders have been asked to pay for.
2
Calculate called-up capital by multiplying issued shares by the call amount per share.
6,000,000×₦0.50=₦3,000,0006,000,000 \times \text{₦}0.50 = \text{₦}3,000,000.
This determines the aggregate amount legally demanded by the company from its shareholders.
3
Distinguish called-up capital from paid-up capital and issued capital.
Paid-up capital = 5,200,000×₦0.50=₦2,600,0005,200,000 \times \text{₦}0.50 = \text{₦}2,600,000; Calls in arrears = 800,000×₦0.50=₦400,000800,000 \times \text{₦}0.50 = \text{₦}400,000.
Unpaid amounts on called shares create calls in arrears but do not reduce the total called-up capital figure.

Key Concept

Distinction between Authorized, Issued, Called-up, and Paid-up Capital in Private Limited Companies
Estimated Time:2m 0s
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Topics

Private Limited Companies: Characteristics, Formation Documents, and Capital

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