Shares and the Statement of Capital

A company's capital divides into equal units of ownership known as shares. The number of shares held in a company indicates the total stake that a shareholder has in that company.

Statement of capital

In order to register a company, Companies House requires a Statement of Capital. Our online system submits this when you make your application.

The Statement of Capital gives the following information:

The number of Shares issued: This can be any amount but is always whole numbers.

The currency in which the shares are denominated: The Companies Acts allow shares to be issued in Euros, Dollars or any other currency the directors think appropriate. However, it is very unusual to have shares issued in any currency other than British Pounds (£). Our online application will only deal with £s.

The nominal value of each share: This is the amount payable to the Company for each share. The value can be anything from 1p upwards. The vast majority of companies issue shares with a nominal value of £1

The Classes of shares issued: When a company issues shares it gives the holders of those shares rights. So each holder of shares in a given class has equal rights. Companies can issue many classes of shares to suit their needs. The majority of Companies issue one class of shares only.

We set out below a Sample Statements of Capital:

Class of Shares e.g. Ordinary, Preference etc.	Amount paid up on each share	Amount (if any) unpaid on each share	Number of shares	Aggregate nominal value
A ordinary shares	£1	0	100	£100
B ordinary shares	£1	0	1000	£1000

Class of Shares e.g. Ordinary, Preference etc.	A ordinary shares
Amount paid up on each share	£1
Amount (if any) unpaid on each share	0
Number of shares	100
Aggregate nominal value	£100

Class of Shares e.g. Ordinary, Preference etc.	B ordinary shares
Amount paid up on each share	£1
Amount (if any) unpaid on each share	0
Number of shares	1000
Aggregate nominal value	£1000

Shareholders Rights and the “Prescribed Particulars”

The Articles of Association set out the rights of shareholders: the Prescribed Particulars. The vast majority of Companies are formed using the model articles given in the Companies (Model Articles) Regulations 2008 (SI 2008/3229). These give ordinary shareholders the following rights:

The right to attend and vote at shareholders meetings-1 share 1 vote

The right to share in any dividend

The right to share in a distribution of any surplus if the company is wound up.

There is no limit to how many classes of shares a company can issue. Each class having its own set of rights. However, any variation requires bespoke Articles of Association.

Tip: If you wish to issue multiple share classes, go to our “miscellaneous” tab at step 2 in the order process. At step 3 select the option to issue multiple share classes. Simply follow the instructions or contact support for help.

Paid and Unpaid Shares

The model Articles of Association, allow shares to be issued to the founders as fully paid up, partly paid up or unpaid. Flexibility is helpful when, for instance, investors are awaiting funds before they can invest. After the initial issue, shares cannot be issued for less than their nominal value.

Shares that are issued as paid can in fact remain unpaid on the balance sheet. This simply means that the shareholder owes the company the amount for which he has subscribed e.g. £100 for 100 ordinary shares of £1. In the event that the company is insolvent and goes into liquidation, the receiver can ask the shareholder for the amount unpaid.

Tip: If you are forming a company that is not going to trade, leave the shares unpaid. That saves having to open a bank account and incurring unnecessary bank charges. We recommend this when companies are being formed simply to protect or register a name.

Shareholders Obligations

Limited Companies are formed to protect their owners from liability. The only obligation a shareholder has, is to settle the amount due on his shares when required. There may never be a need to pay for the shares unless the Company becomes insolvent.

How many shares should I issue?

When making your decision you should be aware of the following:

You can only issue a whole number of shares i.e. 1,2, 3 100, 1000 etc. You cannot issue fractions or percentages of shares.

Unless the Articles of Association state otherwise, there is no limit to the number of shares you can issue. The model Articles of Association used by us, have no limit.

The more shares you issue, the greater your potential liability. Shares can be issued unpaid, but they will need to be settled if the company becomes insolvent.

You can always increase the amount of shares in issue when you need to. However, it takes paperwork and time to do so.

Tip: If you intend to issue shares to employees or other investors, it is best to issue 100 or more at the start. You will save yourself time and paperwork later on.

Tip: When two shareholders form a company with evenly allocated shares, their company is “deadlocked”. This means that neither shareholder can force a decision and the Company’s business can be impaired. Careful thought should be given to avoid this situation arising.

Tip: Single owner/manager companies often issue 1 share only. This is especially the case when the company does not need capital to start trading.

Share Certificates

A share certificate proves the ownership of the shares described in the certificate.

It states:

The date on which it is issued.

The name and address of the shareholder.

The number of shares held.

The class of shares.

The amount paid, or treated as paid on those shares.

Companies are required to issue certificates within 2 months of the issue or transfer.