What is Call in Advance?
Call in advance is the opposite of calls in arrears. It happens when a shareholder pays for some or all of their shares before the company officially requests the payment. Think of it like paying off your investment early. For instance, if you invest in a startup that allows staged payments for shares, you might choose to pay everything upfront to gain full ownership and voting rights sooner. The company benefits from immediate access to funds, while you potentially secure a better deal by locking in the share price early.
Features of Call in Advance
- Early Payment: It’s when a shareholder voluntarily chooses to pay for their shares, or a portion of them, before the official due date.
- Proactive Approach: This allows shareholders to get ahead of future calls and potentially benefit from early investment opportunities the company might offer.
- Company Flexibility: Calls in advance provide companies with a cash flow boost, helping them manage finances and potentially invest in growth initiatives sooner.
- Interest Potential: Some companies may offer interest on early payments, making it an attractive option for shareholders seeking additional returns.
- Authorization Required: Not all companies allow calls in advance. This option depends on the company’s articles of association.
Difference between Calls in Arrear and Calls in Advance
Investing in a company can involve calls for payment on your shares. Understanding the difference between calls in arrears and calls in advance can help you manage your financial obligations and avoid any surprises. Let’s study what these terms mean and how they impact you as a shareholder.