Legal Definitions - paid-up stock

Paid-up stock refers to shares of a company's ownership for which the company has received the full agreed-upon purchase price from the shareholder. This means the shareholder has no further financial obligations to the company for those specific shares, and the company cannot demand additional payment for them. The shares are considered fully funded from the company's perspective.

• Example 1: Direct Purchase in an Initial Public Offering (IPO)

  When Sarah invested in a new tech company's IPO, she purchased 1,000 shares at $25 each and paid the full $25,000 upfront on the day of the offering.

  Explanation: Since Sarah paid the entire purchase price for her shares immediately, her 1,000 shares are considered paid-up stock. The company has received all the money it is owed for those shares, and Sarah has no further payment obligations to the company for them.

• Example 2: Completion of an Employee Stock Purchase Plan

  A manufacturing company offered its employees the opportunity to buy company stock through a payroll deduction plan over two years. Mark opted in and had a portion of his salary deducted each month. After 24 months, he completed all his payments for the 500 shares he was allotted.

  Explanation: While Mark's shares were not initially paid-up, they became paid-up stock once he completed all the required installment payments. At that point, the company had received the full value for those 500 shares, and Mark owned them outright without any remaining financial commitment to the company for their purchase.

• Example 3: Issuance of Bonus Shares from Company Reserves

  A well-established retail chain decided to reward its long-term shareholders by issuing bonus shares, distributing one additional share for every ten shares already held, funded entirely from the company's accumulated profits. No new money was requested from the shareholders for these bonus shares.

  Explanation: Even though shareholders did not directly pay for these bonus shares, they are considered paid-up stock. From the company's perspective, the value of these shares has been fully covered by its own reserves, meaning there is no outstanding payment due from the shareholders for their acquisition.