Issued and paid-up share capital account (or stated capital)

Both provincially and federally incorporated corporations are required to maintain an issued and paid-up share capital account (federally stated capital account), which is subdivided by class of shares (and series of shares, if applicable).

What is this account? This is anotional account, which represents the consideration received by the company for each class of shares. Where there are par value shares (provincial only), only the par value amount is paid into the account. The objective is to protect the corporation's creditors by regulating how the capital invested in the corporation can be returned to the shareholders (capital maintenance principle).

For example, if at the time of the organization of a corporation 100 Class "A" shares are issued for a consideration of $100 fully paid upon issuance, this amount of $100 will be charged to the subdivision of the issued and paid-up capital stock account relating to the Class "A" shares. This amount may be reduced or increased under corporate law, and must be changed on the occasion of transactions such as the issue, redemption or purchase by the company, exchange and conversion of shares. Certain elections also exist in corporate law to pay only a portion of the consideration received by the corporation, such as on a rollover of property.

The concept of issued and paid-up share capital is primarily a legal concept under corporate law. It may differ from the amount of share capital shown in the financial statements. When preparing financial statements, the accountant follows accounting standards and principles, which may be inconsistent with corporate law. Issued and paid-up share capital is also distinct from 'tax paid-up capital', which is used to determine, among other things, the amount that shareholders can withdraw tax-free. The issued and paid-up share capital is, however, the starting point for the calculation of the tax paid-up capital, which can then be adjusted downwards.

The amount shown in the subdivision of the account for each class is determined primarily by analysing the company book, which contains, in the securities register and in the resolutions of directors, details of share transactions, and the elections made by directors to pay into the account only part of the consideration, where permitted by law.