Shares and Share Capital
The following information has been complied based on the
most frequently asked questions about shares and share capital
for a Private Limited Company.
What
is the "share capital"?
What is "authorised share
capital"?
What is "Issued share capital"?
Can a company alter its issued
share capital?
What does the allotment of
shares mean?
How do I allot shares in my
new limited company?
What is the procedure to
transfer existing shares to new investors?
How
do I issue more shares?
What
is the "share capital"?
Share
capital is the investment in a company by its members (owners).
The amount is contributed in exchange for the share of ownership,
a certificate being issued for each share.
When
a company is established, the people who form the company
decide that the member's liability is limited to their contributed
share capital. The statement of capital for a company
states the following in this regard:
- The value and currency of each share class and any prescribed rights (e.g. voting and dividend rights)
- The
names of the people who have agreed to own shares and
the number of shares each will own. This is the issued
share capital
- The amount paid up per share by the shareholders
- Those
people who have agreed to take some or all of the company
shares are called "Subscribers"
What
is "authorised share capital"?
This term no longer applies to companies registered after 01 October 2009. Prior to this date companies would declare an authorised
or nominal share capital which is the maximum value of shares
that can be distributed to existing or potential investors.
Or, the amount of share capital stated in the memorandum
of association is the company's 'authorised' or 'nominal'
share capital. It is the total share capital available to
the company.
From 01 October 2009 companies no longer have a capped share capital. They simply issue what is required at the time of incorporation and can then issue further shares at a later date with no capped maximum (subject to the approval of existing shareholders who may have prescribed rights).
What
is "Issued share capital"?
Issued
share capital is the aggregate (total) number and value of shares issued by a company. For example, if a company
has two shareholders both holding 50 x GBP1.00 shares then the total issued share capital is GBP100.00 or 100 x GBP1.00 shares.
It
is worth remembering that issued shares must be paid for
at some stage, not necessarily immediately, bit in the future.
If you decide to issue GBP1,000,000 shares to a subscriber
then that person must pay the company GBP1,000,000 at some
stage. For this reason most companies are formed with only
one GBP1 share issued per subscriber (assuming all subscribers
are equal owners of the company).
Can
a company alter its issued share capital?
A
company may increase its issued capital by allotting more
shares. Allotments must only be done under proper authority as detailed by the Articles of Association.
What
does the allotment of shares mean?
'Allotment'
is the process by which people become members of a company.
Once the subscribers agree to take shares on incorporation,
these shares are regarded as 'allotted'.
Later, more people may become the members of the company
and be allotted shares. However, the directors must not
allot shares without the authority of the existing shareholders subject to the Articles of Association.
This authority is either stated in the company's articles
of association or is given to the directors by resolution
passed at a general meeting of the company.
How
do I allot shares in my new limited company?
At the time of registering a new company you must provide a Statement of Capital which states who you are issuing shares to, how many shares and the rights attached to those shares. If you use our electronic company registration service then we will deal with Statement of Capital by asking you simple questions.
If you wish to issue further shares once your company is registered please see the below question "How do I issue more Shares?".
What
is the procedure to transfer existing shares to new investors?
The
process for transferring shares to new or potential investors
is simple. The existing shareholder has to fill out the
relevant Stock Transfer Form and surrender their share certificates
to the company registrar. The registrar will record the
transaction in the Register of Members and issue a new share
certificate duly authorised by the relevant signatures.
The shares will officially be in the name of the new member
only once the stock exchange transaction is recorded in
the registrar. Usually the company secretary or one of the
company directors assumes the role of company registrar.
You do not send the share transfer forms to Companies
House.
There may be tax payable on the transfer of shares.
How
do I issue more shares?
To
transfer existing shares see the question above. If you
wish to issue further shares a form SH01 should be completed
and sent to the Registrar of Companies at Companies House.
New shares can only be issued in accordance with the company's
Articles of Association which may include
preemption rights protecting existing share holders. All
new share issues must be recorded in the company's Register
of Members.
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