What’s the difference between a shareholder and a subscriber? Is there a maximum limit on share capital? How do you notify Companies House when your shareholders change? These are just a few of the questions we answer in this blog post covering everything you need to know about share capital.
Share capital is the total number of shares a company has issued to its shareholders. Shares issued when setting up a limited company are usually £1. If more than one share is issued, it will determine who controls the company. For example, two shares for two shareholders in the company means the company is equally controlled with each party owning 50% of the company. If the two shareholders were to own two and three shares respectively, then the divide would be 40/60%, making shareholder number two the majority shareholder.
All limited companies must issue at least one share. There is no maximum share capital, but all shareholders must pay the company the value of their shares. For example, if a shareholder owns 50 shares at £1 each, they would have to pay the company £50.
Public limited companies (PLCs) may also issue two shares at the time of incorporation, but it also has to issue a share capital of at least £50,000, of which 25% must be paid in full before it starts trading.
The Memorandum and Articles of Association for a company should state the initial share capital at the time of formation. The company’s latest Confirmation Statement should have a full list of members attached. This should take into account new shares issued or transferred until it was filed.
A subscriber has a subscription agreement to purchase shares in a privately owned company. Their name would appear on the Memorandum and Articles of Association at the time of incorporation.
A shareholder owns shares in a public or private company.
Both private limited companies and public limited companies (PLCs) require a minimum of one shareholder. Subscribers are optional.
It is up to the company to issue either paid or unpaid shares. A limited company would usually issue fully paid ordinary shares. This means the shareholder pays the full amount agreed and has no further financial obligation to the company.
A company can also issue nil or partly paid shares and agree if or when the shares should be paid for. For example, this could be done by settlements made on particular dates.
If the company was to go into liquidation, shareholders would have to pay amount owned for their shares in full.
When a private limited company allots shares, it simply means it is issuing new shares. Increasing the share capital post incorporation can be done for several reasons, such as giving employees shares or raising additional capital.
You are obligated to let Companies House know this has occurred within one month by completing a “Return of Allotment of Shares”. You will need to provide the following information:
You can file this with Companies House online or by post. You do not need to notify Companies House of the name of the new shareholder until your next Confirmation Statement is due.
If you need to transfer company shares or change a shareholder, you will have to issue a share transfer form. A J30 form will be used if shares a fully paid. These forms will be kept with the new shareholders because Companies House does not need to be notified until the Confirmation Statement is due.
Yes, unless your company’s Articles of Association prevent you from doing so. Many family owned companies ensure the continuity of their business by giving shares to their children.
Under UK law, children under the age of 18 are minors and do not have the capacity to enter into contracts except those for necessaries, which are goods and services necessary or beneficial to them, such as food, clothing and education. Shares would not be regarded as necessaries so a child could not be held to a contract to buy shares, but would be able to ratify that contract after turning 18.
A company can increase its share capital by allotting new shares. Allotments must be made with the correct authority. Shares are allotted on behalf of the company by its directors and are authorised either by the company’s Articles of Association or a company resolution.
There is an exception to this given by the Companies Act 2006. A private company incorporated under the Companies Act 2006 with only one class of shares does not need prior authorisation unless there is a specific restriction to doing so in the Articles of Association. In that case, the company would need to pass an ordinary resolution.
When issuing new shares, an SH01 form should be completed and filed at Companies House within one month of the allotment. This can be filed on paper or online.
There are two main sections on the form: the allotment and the statement of capital, both parts should be completed. This will update Companies House with the number and class of shares issued. Companies House does not need to be notified of the names of the new shareholders until the next Confirmation Statement is filed.