Company Shares and Shareholders

Information about the company shareholders.

A limited company that is run for profit must have at least one shareholder. The shareholders do not have to be the directors or secretary for the company but it is often the case that they are. The shareholders can also be corporate entities. It is not a requirement that the shares are actually held by a person. A shareholder can be based anywhere in the world, they do have to be UK citizens.

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 holding.
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 memorandum of association for a company states the following in this regard:
• Total share capital of the company
• The division of share capital into shares of fixed amount. For example GBP1,000.00 divided into 1,000 GBP1.00 shares
• 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
• Those people who have agreed to take some or all of the company shares are called "Subscribers"

What is "authorised share capital"?

Authorised or nominal share capital 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.

What is "Issued share capital"?

Issued share capital is the number and value of shares issued from the total authorised share capital. For example, if a company has an authorised share capital of GBP1,000.00 divided into 1,000 shares of GBP1.00 and there are two subscribers only taking one GBP1.00 share each the total issued share capital is GBP2.00. In this example one issued share therefore represents a 50% ownership of the company. The remaining 998 shares are meaningless until issued; they are simply there for future expansion. Please note these rules only apply to Private Limited Companies (Ltd's), Public companies (PLC's) have different rules.

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).

Share Certificates are used to record the owner ship of shares