Partly paid shares (also known as contributing shares) are issued without the business requiring payment of the full share price. At a specified future date, the company is entitled to call for all or part of the outstanding issue price. The shareholder is legally obliged to pay this at this time.
In general, a holder of a partially paid share has the same rights as an ordinary shareholder with regard to voting and dividends. However, those rights will be proportional to the amount paid on the share.
Some of the pros of this investment type include:
A smaller initial investment is required (as investors only have to pay a portion of the purchase price up front)
Greater flexibility (as investors are able to pay for shares over time, rather than having to come up with the full purchase price all at once)
Reduced risk (as investors can spread the risk of their investment over time by only paying a portion of the purchase price upfront)
The cons are:
They incur additional costs, such as call options, which can be exercised by the company to require the remaining balance to be paid.
A risk of losing shares (as if an investor is unable to pay the remaining balance of the shares, they may lose their investment)
Lack of control (as investors may lose control of their shares if the company exercises its call option, requiring the remaining balance to be paid)
Limited liquidity (as partly paid shares can be more difficult to sell than fully paid shares, and the market for them may be less liquid)
Uncertainty (as the terms and conditions of the partly paid shares, such as the schedule of payments and call options, can be uncertain and may change over time)