Stated value is an amount assigned to no-par shares for legal-capital and accounting purposes. Learn how it differs from par value and market price.
Stated value is an amount assigned to shares without par value for legal-capital and accounting allocation under some corporate-law systems. It can determine how issue consideration is divided between stated capital and additional paid-in capital, but it is not the share’s issue price, market price, fair value, book value, or liquidation preference.
For a simple issue of no-par shares with an assigned stated value:
If the shares are issued for more than the stated value, a simplified allocation is:
These formulas do not determine whether a company may establish stated value or how the balance can later be reduced or used. Those are legal questions under the corporation’s jurisdiction and governing documents.
Assume a corporation issues 100,000 no-par common shares for $10 each. Before or in connection with the issue, the board validly assigns $1 per share to stated capital under the applicable law.
| Component | Calculation | Amount |
|---|---|---|
| Cash proceeds | 100,000 x $10 | $1,000,000 |
| Stated capital | 100,000 x $1 | $100,000 |
| Excess contributed capital | $1,000,000 - $100,000 | $900,000 |
A simplified entry is:
1Debit: Cash $1,000,000
2Credit: Common stock or stated capital $100,000
3Credit: Additional paid-in capital $900,000
The $1 stated value does not mean investors paid $1, that the shares trade for $1, or that holders can recover $1 in liquidation. It only explains the approved allocation in this simplified example.
| Measure | What it represents | Does it change with market trading? |
|---|---|---|
| Stated value | Assigned legal-capital amount for no-par shares where applicable | No |
| Par Value Stock | Nominal amount attached to par-value shares in governing documents | No |
| Issue price | Consideration received by the issuer in a primary issuance | Set for each transaction |
| Market price | Price at which shares trade between market participants | Yes |
| Book value per share | Defined book equity divided by relevant shares | Changes with equity and share count |
| Liquidation Preference | Contractual priority amount for specified preferred shares | Depends on terms, not stated value alone |
Calling stated value a “baseline value” for investors is misleading. It does not establish a minimum market price, valuation floor, guaranteed recovery, or fair issue price.
Delaware General Corporation Law permits corporations to issue shares with or without par value. Section 154 addresses how a board may determine the portion of issue consideration treated as capital. For no-par shares, the consideration designated as capital becomes the stated capital of those shares.
The Delaware rule is an example, not a global definition. Other U.S. states and countries can use different concepts, procedures, terminology, or capital-maintenance rules. Some reporting entities may not present a separate stated-value amount at all.
The legal allocation can affect:
Those effects should be verified with current law and the corporation’s documents. A journal entry alone does not establish legal compliance.
Stated value is useful for reconciling historical contributed-capital accounts, but it is usually not a valuation input. Analysts should focus separately on:
Suppose the shares in the worked example later trade for $18. The company does not record an $8-per-share increase in stated capital or APIC from that secondary-market change. No new owner contribution occurred.
This article is educational and does not provide corporate, legal, tax, accounting, securities, valuation, or investment advice. Verify current law and the issuer’s governing documents.