What are unpaid shares?

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When issuing new shares, the directors will need to determine whether they should be issued as fully paid, partly paid or nil paid and also decide whether any share premium in excess of the nominal value of the shares should be charged. In making these decisions, the directors need to take into account any specific provisions within the company’s Articles of Association and bear in mind their duty as directors to promote the long-term success of the company.


With fully paid shares, the full value of the share is paid by the investor to the company as part of the share issue process. The company will generally pay this into a nominated bank account. In contrast, with unpaid shares none of the value of the shares is paid into a nominal account at the point the shares are issued, although the shareholder retains the liability to pay at a later date. Shares can also be partly paid, where part of the value is paid up front but with an amount remaining unpaid until a later point in time.

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The nominal value (or book value) of a share is an arbitrary figure assigned to it. You’ll usually see shares issued with a nominal value of £1 each, although the nominal value can be much higher or even just a fraction of a penny. Shares cannot be issued for an amount less than their nominal value.  This rule is still honoured for nil or partly paid shares; the company will retain the right to call the balance of the nominal amount not paid until at a later date.

We’ll take a look at the different options for a share issued at its nominal value of £1.00 to show the difference between fully paid shares, partly paid shares and unpaid shares:

Fully paid shares 1


In the case of fully paid shares, the company receives the nominal amount of the shares.  So for a £1.00 ordinary share to be fully paid the company will receive £1.00. Most shares that are issued by companies are fully paid.

With partly paid shares, the company receives some consideration for the shares but less than the nominal amount.  So if, say, 60p is initially paid for shares with a £1.00 nominal value the shares would be called partly paid. The remaining 40p could be ‘called’ by the company at a later date, meaning the shareholder would then have to pay it.

Partly paid shares 1
Unpaid shares 1


The company receives zero consideration up front for unpaid shares (which are also known as nil paid shares).  The £1.00 of nominal value could later be called by the company, either as a single payment or a series of calls.

While many shares are issued at their nominal value, sometimes shareholders are willing (at least ultimately) to pay more than this book value. In cases like this where the market value is greater than the nominal value of the shares, the difference is called the share premium.

Once again, these shares could be issued fully paid, partly paid or nil paid. We’ll look at the example of a share with £1.00 nominal value issued at £2.00 (where the share premium is therefore £2.00 – £1.00 = £1.00):


With a fully paid share, the company receives the full nominal amount of the share and the whole of the premium.  So for our £1.00 ordinary share issued at £2.00, the company receives all of the £2.00 up front. The shareholder has nothing further to pay.

Fully paid shares 2
Partly paid shares 2

The company receives part of the consideration for a partly paid share but not all of it. There are a number of different possible scenarios: the amount that remains to be paid by the shareholders could be part or all of the share premium but might also include some of the nominal value of the share.

In the case of a nil paid share / unpaid share, the company has received no consideration up front.  The £2.00, including both the nominal value and share premium, could be called by the company at a later date or dates. At that point, the shareholder would need the settle the amount(s) called.

Unpaid shares 2

Why would a company issue unpaid shares?

Although unpaid and partly paid shares are far less common than fully paid shares, there are a number of reasons why a company might choose to issue them:

  • It might form part of a pre-planned schedule of payments, whereby the shareholder commits to the full price but needs time to access funds
  • Convenience when first setting up a company – perhaps because the circumstances do not warrant setting up a bank account into which to pay the nominal value of the shares issued
  • In line with a strategy to implement an acquisition or merger of companies.
  • To retain the option to forfeit the shares at a later date.

In many cases, however, unpaid shares exist without the directors ever having really made a conscious decision to opt for them instead of fully paid shares. Sometimes this happens inadvertently when the company is formed – where an incorporation agent only offers formation with unpaid shares or the wrong box is accidentally ticked and the wrong details confirmed to Companies House.

Can a company have both fully paid and partly (or nil) paid shares?

Yes, subject to any provisions in the company’s articles of association or a shareholders’ agreement.  Shares (often called subscriber shares) are allotted when a company is first incorporated.  Further shares can be allotted at any time after incorporation.  It does not follow that if the initial shares are nil paid all subsequent issues need to be the same type. Conversely, if the initial shares are fully paid there is no need for all subsequent shares to be.  Accordingly a company can quite properly have both paid and unpaid shares, either by creating a new share class or even within the same share class.

When will owners of nil or partly paid shares be required to pay the balance?

The answer could be never.  Much will depend on the success of the company and/or whether the terms on which the nil or partly paid shares were allotted specify a particular date or event which triggers the payment becoming due.  If the company is in financial difficulty or needs capital to expand, the directors (or administrators in cases of financial difficulty) may conclude that it is in the best interests of the company to ‘call’ the unpaid nominal amounts on each share that is not fully paid.  They will need to check that they have the right to do this (which they usually will unless it has been specifically excluded).

How does a company collect the balance?

In the ordinary course of events, the unpaid amount is requested by the company sending a ‘call’ notice. Take a look at our article covering how to process a call on unpaid amounts on shares, which also includes a number of free templates that can be adapted and used.

Can unpaid shares and partly paid shares be transferred?

Yes, both unpaid shares and partly paid shares can usually be transferred to a new shareholder (subject to the company’s Articles of Association). While in most cases the process is the same as transfers of fully paid shares, to protect the interests of the company and the person transferring the shares it’s important for the new shareholder to accept any ongoing liability for calls on the unpaid or partly paid shares. That’s why a J10 form is used to transfer unpaid or partly paid shares: in another article, we look in detail at how to complete the J10 form.


For now this blog should serve as a warning that shareholders taking or even transferring nil or partly paid shares should only do so with great care as there are too many tales of woe from original owners of nil or partly paid shares being ‘surprised’ (and sometimes ruined) by a call notice from a company they have long since ceased to have any involvement with.

Inform Direct is the innovative and easy way to manage a company's shares, make new share allotments, record share transfers and more.

Article Comments

  1. Satish Anikhindi says:

    Thanks. The concept has been explained beautifully in simple terms.

    1. Johnathan Korchak says:

      Thanks Satish. Really glad you found it useful!

  2. Ilda says:

    Thanks. Very much appreciated!

  3. Debtor Finance says:

    Great article! This will surely help me to understand unpaid shares. I think that this article This article is very helpful for business owner like me. Thanks for sharing this article.

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