Registered share capital can be paid or unpaid. Does it matter which one it is?
Registered Share Capital
The ASIC portal lists the registered share capital for each company. It lists the class of shares as well as their payment status. In this episode, Damien Lehmann of Lehmann Law Group will walk you through the intricacies of registered share capital.
Here is what we learned but please listen in as Damien explains all this much better than we ever could.
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Registered Share Capital
1 – Paid or Unpaid
Why does it matter whether share capital is marked fully paid or not fully paid in the ASIC portal? As long as shares are unpaid, the company has a receivable against its shareholders.
2 – Marked Paid but not Actually Paid
The ASIC register just records a transaction, ie payment. It doesn’t create the transaction. So if the ASIC portal says the registered share capital has been paid but it hasn’t, then it hasn’t.
You could argue that the capital had been paid in but was then loaned back to the shareholder. But the result is the same. The company has a receivable against the shareholder.
However, the outcome still differs. If the capital was never paid in, then there is no Div 7A issue. But if the capital was paid in and then loaned out again, then you would have a Div 7A issue as long as there is sufficient distributable surplus.
3 – Additional Paid-in Capital
There is no such thing as additional paid-in capital unless you registered it with ASIC. Anything else is just a loan.
We used to have par value and then a share premium account. But in 1998 that all changed and now there is just share capital.
And then we went off-topic.
4 – Limited v Pty Ltd
99% of companies in Australia are Pty Ltd and 1% are Limited. So the most common legal corporate structure is proprietary limited. The only distinction is between a small Pty Ltd and a large Pty Ltd.
If you are a large Pty Ltd, you still need to get your accounts audited. So as a large Pty Ltd you have to comply with some of the rules that also apply to Limited.
5 – Limited
You would only choose a Limited if you want to go public and/or have more than 50 shareholders.
You need to file audited reports, need three directors and a secretary. And at least two of the directors and the secretary must be residents of Australia.
Many public companies are ASX-listed. And once you are ASX-listed, there is a huge pack of additional rules the ASX requires you to do.
So this was just a very short summary of what we covered in this interview. There is a lot more, so please listen in.
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