Fully paid shares vs partly paid & unpaid

MrMartyn

There's a few things I'm not sure about with regards to buying/owning/selling shares:

1) If I buy shares (e.g. in small cap companies, probably via online broker/platform), how do I know whether the shares are "fully paid" or not? Obviously I'd want to know before I decide whether or not to buy the shares.

2) How do I know what the "nominal value" of the shares is? (e.g. If I bought 100 unpaid shares of nominal value £1 then I could potentially owe the company £100 if they "called in" payment for the shares). Again, I'd want to know this before I decide whether or not to buy the shares.

3) If I buy unpaid or partly paid shares and then sell them before the payment is "called in", would I be liable to pay if the company "called in" payment after I'd sold the shares?


The reason for my questions is: I'm thinking of investing/trading a modest amount in the shares of individual companies (as opposed to funds). It would probably be small-cap firms (e.g. mining, oil) and I'd be using an online broker/platform (or possibly a telephone broker although I'd prefer online). I want to be sure that I don't incur any liability other than what I've agreed to pay to buy the shares (e.g. number of shares multiplied by share price). For example, if I decide to buy 500 shares in xyz plc for a share price of £2 on the AIM index, then I pay the seller £1000 and then I own the shares. If the shares have a nominal value of £1 per share, I don't want to get charged £500 (= 500 shares @ £1 per share) at some point in future if the shares turned out to be unpaid.

Thanks.

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. Any information I post may or may not be correct, and should therefore not be relied upon as fact. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability.

bigadaj

Based on your question I don't think you need your disclaimer.

The nominal value of the shares you buy are just that, you pay a sum for them which is normally above this figure and that is your total investment. If the company goes bust then you lose your stake, there's no further call on you as an ordinary shareholder.

Trading and dealing shares is high risk, there's no additional liability but you may well lose all your invested money, particularly if this is into small mining, oil or similar companies. It's the equivalent of a punt on the 2.30 at kemp ton, nothing wrong in that so long as you are aware of the risks you are exposed to.

MrMartyn

bigadaj wrote: »

Based on your question I don't think you need your disclaimer.

The nominal value of the shares you buy are just that, you pay a sum for them which is normally above this figure and that is your total investment. If the company goes bust then you lose your stake, there's no further call on you as an ordinary shareholder.

Trading and dealing shares is high risk, there's no additional liability but you may well lose all your invested money, particularly if this is into small mining, oil or similar companies. It's the equivalent of a punt on the 2.30 at kemp ton, nothing wrong in that so long as you are aware of the risks you are exposed to.

Thanks for your reply. No offence (I do appreciate you taking the time to reply to my post), but I'm not sure whether it is as simple as you seem to suggest. You only have to google "fully paid shares" (without the quotes) or "unpaid shares" (again without quotes) to see that there is such a thing as shares for which the nominal value has not been paid (either "unpaid shares" or "partly paid shares").

Based on what I've read in the search results, it looks as though the shareholder who holds unpaid or partly paid shares could be liable to pay money to the company if it calls in the payment (e.g. if the firm goes bust, or the Directors decide that the firm needs the money). Therefore, although the shares could be considered to be an asset (e.g. if they have rights to dividend income), they come with a liability attached. Obviously the potential buyer of the shares would want to be aware of any liabilities attached to the shares before he/she decided whether or not to invest.

As a layman, I get the impression that amateur investors are typically unaware of the distinction between fully paid and unpaid/partly paid, but perhaps they get by due to fully paid being the most common (I don't know whether they really are the most common). However, I like to know exactly what risk is involved before I decide whether or not to invest, and crucially, I want to know what is the maximum possible downside of whatever investment I'm considering.

My point is:

1) How do I know whether shares are fully paid or not?

2) How do I know what the nominal value is (so I could calculate the maximum liability in the event that payment was called in)?

I would expect the answers to these questions to be printed on the share certificate (although I could be wrong!), but... I'm not likely to see that before buying the shares, and if I buy/hold the shares via an online broker/platform then I might never even get to see the share certificate. I really do need to know this information before I make the decision of whether or not to invest.


Thanks.

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. Any information I post may or may not be correct, and should therefore not be relied upon as fact. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability.

Drp8713

Why would a company list on AIM and at IPO stage offer its shares for free or under book value so it can ask for a nominal amount if it goes bust?

masonic

MrMartyn wrote: »

Thanks for your reply. No offence (I do appreciate you taking the time to reply to my post), but I'm not sure whether it is as simple as you seem to suggest. You only have to google "fully paid shares" (without the quotes) or "unpaid shares" (again without quotes) to see that there is such a thing as shares for which the nominal value has not been paid (either "unpaid shares" or "partly paid shares").

Based on what I've read in the search results, it looks as though the shareholder who holds unpaid or partly paid shares could be liable to pay money to the company if it calls in the payment (e.g. if the firm goes bust, or the Directors decide that the firm needs the money). Therefore, although the shares could be considered to be an asset (e.g. if they have rights to dividend income), they come with a liability attached. Obviously the potential buyer of the shares would want to be aware of any liabilities attached to the shares before he/she decided whether or not to invest.

As a layman, I get the impression that amateur investors are typically unaware of the distinction between fully paid and unpaid/partly paid, but perhaps they get by due to fully paid being the most common (I don't know whether they really are the most common). However, I like to know exactly what risk is involved before I decide whether or not to invest, and crucially, I want to know what is the maximum possible downside of whatever investment I'm considering.
<snip>

You seem quite convinced that you've found some sort of minefield that has gone unnoticed by amateur investors, and didn't seem particularly convinced by bigadaj's explanation, so it's probably best that I suggest you return to your Google investigation. Perhaps you could see if you can come up with any examples of unpaid shares that have been admitted to the market for trading.

jimjames

MrMartyn wrote: »

My point is:

1) How do I know whether shares are fully paid or not?

It tells you on the share certificate. I've never seen any part paid ones though. Can you provide any examples?

Vortigern

When BT was floated the shares were to be paid for in 3 instalments due on specified dates. The shares could be traded as 'partly paid' until the final instalment date.

Holders of partly paid shares knew exactly how much needed to be paid and when that payment was due. The nominal value of the shares has nothing to do with this.

Unpaid possibly refers to nil paid rights, the holders of which have the right to buy more shares at a known cost, or to sell that right to anybody who's prepared to pay for it.

FatherAbraham

Vortigern wrote: »

Unpaid possibly refers to nil paid rights, the holders of which have the right to buy more shares at a known cost, or to sell that right to anybody who's prepared to pay for it.

Almost the same as warrants, then (although these mythical unpaid shares might pay dividends and offer voting rights, I suppose).

Warmest regards,
FA