What share capital means
Share capital is the ownership of a company expressed in units.
A company divides itself into shares, and those shares are allocated to the people who own it. The total value of those shares is the share capital.
What trips people up is treating it as money. A company with fifty million naira in share capital does not necessarily have fifty million naira. The figure describes ownership and permission to issue, not the bank balance.
How it is used
At incorporation you declare a share capital figure and divide it into shares. Two founders splitting a company evenly might declare one million naira as one million shares of one naira each, and take five hundred thousand each.
Later, when an investor comes in, the company issues new shares to them from what remains authorised. If there is not enough headroom, the members resolve to increase the authorised capital and file the increase at the CAC.
Key features
- Divided into shares, allocated to the company's owners
- Declared at incorporation and recorded in the memorandum
- Drives the CAC filing fee, which is assessed on the amount declared
- Attracts stamp duty calculated on the share capital
- Can be increased later by resolution and a filing at the CAC
How this works in Nigeria
The cost link is the practical point. CAC filing fees scale with declared share capital, so a company registering with one million naira pays a minimum filing fee of ten thousand naira, and one declaring far more pays proportionally more, plus higher stamp duty.
That is why the standard advice is to register modestly and increase later when there is a reason. The exceptions are regulated sectors with prescribed minimums, and companies planning to employ expatriates, where much higher thresholds apply for immigration purposes.
Authorised, issued and paid up
Authorised share capital is the maximum the company may issue.
Issued share capital is what has actually been allocated to shareholders.
Paid up capital is what those shareholders have actually paid for their shares.
All three can differ. A company authorised at ten million might have issued two million and have one million paid up. Founders who confuse them end up promising investors shares that were never created, or assuming money exists that nobody ever paid in.
Limits and risks
Share capital says nothing about the health of a business. It is not revenue, not assets and not evidence that anyone can pay their bills.
Inflating it to look impressive is a pure cost, raising your filing fee and your stamp duty for no commercial benefit, and anyone sophisticated enough to be impressed by the number already knows it means very little.
Worth knowing
Do not declare a large share capital to look serious. It costs real money at registration in fees and stamp duty, and it signals nothing about the business.