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Partly paid or contributing shares allow companies to decide whether they wish to offer shares whereby only a section of the full value of the share is payable upfront. For example, if a company was to sell its shares for $50 and then received the full amount, it becomes a fully paid share, whereas if the full amount was not paid and the company was given less than the $50, then it would be known as a partly paid or contributing share.
The company can allow the remaining payments to be made at a later date or dates or can call the shareholders to update them on when the payment needs to be paid. The owners of these shares are legally obliged to pay the balance the company requests at that time. Once the company receives the full amount it then becomes a fully paid share. For owners of partly paid shares, they will receive the same entitlement as those of fully paid shares, which include dividend payments, opportunities to participate in rights and additional issues and have an equal vote at any other company meetings that may occur. With these entitlements owners will usually only be in proportion to the amount that they have paid up to that particular date. Owning partly paid shares can be beneficial to investors who wish to spread the cost of share acquisitions through time.
Partly paid shares that are bought and sold by ASX tend to be recognized with a 5 letter code that consists of the company’s code and a 2 letter suffix, which is usually CA-CZ (excluding CP). Partly paid shares that are traded on ASX or any other share, with the future payment being owned, is carried over to the new owner. For retail investors it is required for them to sign a client agreement with their broker before they first start trading in partly paid shares, to ensure that are aware of the risks that are involved.
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