Accounting for Unpaid Share capital

On 15 June 2018, a new company (“the Company”) was set up, having registered share capital of THB 20 million consisting of 200,000 ordinary shares at a par value of THB 100. On the same date, 25% of the registered share capital was paid up.

Keywords: Mazars, Thailand, Accounting, TFAC, Share capital, BOJ 5, Department for Business Development, DBD

29 October 2019

How should the Company record these transactions, including the share capital that has not been paid up, in the financial statements at the end of 2018?

The May 2016 newsletter of the Thailand Federation of Accounting Professions (“TFAC”) indicated that the Company must record the actual amount of cash received from shareholders for share capital. TFAC did not allow companies to recognize subscriptions for shares that have not yet been paid up as receivables, and thus present the full amount of share capital in the financial statements.

As a result, the Company must present the registered share capital and paid-up share capital in the financial statements as follows:

Statement of financial position 

   

(In Thai baht) 

 

Note

 

As at 31 December 2018

Assets 

     

Current assets 

     

   Cash and cash equivalents 

1

 

5,000,000

Total current assets 

   

5,000,000

Total assets 

   

5,000,000

       

Shareholders’ equity 

     

Registered share capital 

     

(200,000 ordinary share capital at a par value of THB 100) 

1

20,000,000

 

Paid-up share capital 

     

(200,000 ordinary share capital at a par value of THB 25) 

   

5,000,000

       

Total shareholders’ equity

   

5,000,000

Note to financial statements for the period ended 31 December 2018

  1. Share capital

On 15 June 2018, the Company was set up with registered share capital of THB 20 million, consisting of 200,000 ordinary shares at a par value of THB 100. On the same date, shareholders of the Company paid up 25% of total share capital.

As a result, at the end of the year, the Company had paid-up share capital totalling THB 5 million. The total share capital which has not yet been paid up by the shareholders is THB 15 million. The management of the Company will call for payment and collect from shareholders at the end of 2019.

In addition, based on the Department of Business Development’s website, the Company must submit Form BOJ 5 listing the amount of actual cash received from shareholders, not the registered share capital, to the DBD in the first year that the Company is set up. If the Company submits a Form BOJ 5 to the DBD containing incorrect information, then Form BOJ 5 must be revised. The DBD did not allow companies to recognize subscriptions for shares which have not yet been paid up as receivables.

Subsequently, if the Company called for shareholders to pay up the remaining share capital, but only a certain amount was paid up, the Company could recognize the subscriptions for shares which have not yet been paid up as a receivable. However, in the financial statements, the amount still owed by shareholders had to be offset against the total share capital.

For example, if the Company called for payment of the remaining share capital of THB 15 million, but only THB 11 million was paid up, the Company would have to present the registered share capital and paid-up share capital in the financial statements as follows:

Statement of financial position 

   

(In Thai baht) 

 

Note

 

As at 31 December 2019

Assets 

     

Current assets 

     

   Cash and cash equivalents

   

16,000,000

Total current assets 

   

16,000,000

Total assets 

   

16,000,000

       

Shareholders’ equity 

     

   Registered share capital 

     

   (200,000 ordinary share capital at a par value of THB 100) 

     

   Paid-up share capital 

1

20,000,000

 

   (200,000 ordinary share capital at a par value of THB 100) 

   

20,000,000

   Less owed by shareholders 

   

(4,000,000)

Total shareholders’ equity

   

16,000,000

Note to financial statements for the period ended 31 December 2019

  1. Share capital

As of 31 December 2018, the Company had paid-up share capital of THB 5 million. In 2019, the management of the Company called for shareholders to pay up the remaining share capital, but only a certain amount was paid up. The total amount of remaining share capital which has not been paid up of THB 4 million is recorded as owed by shareholders and is offset against the total share capital in the financial statements. As a result, the total paid-up share capital as of 31 December 2019 is THB 16 million.

For more information, please visit the FAP and DBD website.

                    

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