Stock fully paid: Overview, definition, and example
What is stock fully paid?
Stock fully paid refers to shares of stock that have been paid for in full by the shareholder. This means that the shareholder has paid the total purchase price for the shares, and there are no further payments or obligations remaining for those shares. Once stock is fully paid, the shareholder has complete ownership of the shares, and the company does not have the right to demand any additional payments for those shares.
In simpler terms, stock fully paid means that the shares are completely paid for and the shareholder does not owe any more money to the company for them.
Why is stock fully paid important?
Stock fully paid is important because it represents a clear and complete transfer of ownership. When stock is fully paid, it guarantees that the company has received all the funds owed for the shares, and the shareholder has no further financial obligations related to that stock. For companies, ensuring stock is fully paid is important for maintaining accurate ownership records and ensuring that shareholders have fully fulfilled their financial commitments. For shareholders, owning fully paid stock means having clear ownership without the risk of future payments.
For SMB owners, understanding fully paid stock is essential when issuing shares, as it helps clarify the rights and responsibilities of shareholders and prevents potential future financial claims related to those shares.
Understanding stock fully paid through an example
Let’s say you issue 1,000 shares of your company at $10 per share. A shareholder buys 100 shares and pays the full $1,000 immediately. This means the stock is fully paid, and the shareholder now owns those shares outright with no further obligations. On the other hand, if the shareholder only paid $500 and still owes the remaining $500, the stock would not be considered fully paid, and the company may have the right to request the outstanding payment.
In this example, fully paid stock represents the complete and final purchase of the shares by the shareholder.
Example of a stock fully paid clause
Here’s an example of what a stock fully paid clause might look like in a corporate agreement or shareholder document:
“The shares issued under this Agreement are fully paid and non-assessable. No additional payments shall be required for the shares after the initial purchase price is paid in full by the shareholder.”
Conclusion
Stock fully paid represents the completion of a financial transaction for shares, ensuring that no further payments are owed for the shares purchased. For SMB owners, understanding the concept of fully paid stock is essential for managing shareholder obligations, maintaining proper ownership records, and preventing future financial claims related to those shares. It offers clarity to both the company and shareholders, ensuring that all financial commitments have been met and ownership is clear.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.