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?
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:
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).
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).
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.
'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.
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?".
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.
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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