Companies Act Section 50

Companies Act – Section 50: Acceptance of Unpaid Share Capital by Company Even When Not Called Up  

1. Overview and Applicability  

Section 50 of the Companies Act outlines the legal provision that allows a company, under certain conditions, to accept the unpaid portion of share capital from its members, even if the company has not issued a formal call for payment. 

This section provides flexibility in capital management by permitting voluntary payment of unpaid share amounts before they are formally required, subject to the company’s governing documents. 

2. Authorisation Requirement through Articles of Association  

The ability of a company to accept such payments from its members depends on specific authorisation in its Articles of Association. 

The articles, which constitute the internal governance rules of the company, must expressly permit the acceptance of unpaid amounts on shares. 

If no such provision is present in the articles, the company cannot lawfully accept voluntary payments of unpaid share capital from its members unless a formal amendment to the articles is made. 

3. Scope of Voluntary Payments  

The provision grants companies the discretion to accept either:  

The full unpaid amount on shares held by a member, or  

A partial payment of the unpaid amount.  

These payments may be accepted even if the company has not formally called up any part of the outstanding amount on the shares. This feature ensures that companies can receive capital earlier than scheduled if the member is willing to make such payments, enhancing the company’s liquidity. 

4. Impact on Voting Rights of Members  

Section 50(2) specifically addresses the voting rights of members who make voluntary payments under subsection (1). It makes clear that:  

A member will not acquire voting rights for the amounts voluntarily paid until such amounts are officially called up by the company.  

This ensures that voting rights correspond only to the amounts that the company has formally called, preventing any premature or unintended influence over the company’s decision-making processes by members who make early payments.

5. Purpose and Rationale  

This provision serves several practical and strategic purposes:

Capital Flexibility: Allows companies to receive funds in advance, which can help with operational requirements or investment opportunities.

Shareholder Convenience: Members who are financially able may prefer to make payments ahead of schedule rather than waiting for a formal call.

Governance Protection: By withholding voting rights until the amounts are officially called up, the law maintains a balance between voluntary payments and corporate governance.