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What Do I Need To Know About A Company’s Share Capital?

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When a company is incorporated, it is typically incorporated as a company limited by shares; this means that company owners are only liable for the amount of money they have invested in the company. 

To benefit from this, company owners will need to invest an amount of money into the business in the form of share purchases. The total sum of money invested in share purchases is known as the share capital of the company.

Let’s walk through this one step at a time.

What are shareholders?

Pretty much as it sounds, shareholders are individuals who hold shares within a company.

These shareholders collectively own the company through the number of shares they hold and how they are divided between them. However, these individuals don’t have to be directors of the company.

What is the difference between shareholders and directors?

Every shareholder has the right to vote on significant decisions relating to the company, also known as having voting rights. The person holding the most shares has the most voting right as they are percentage based, also known as having a controlling interest.

However, shareholders have no say in the day-to-day running of the company; this is the realm of the directors.

What is share capital?

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The share capital is the amount of money invested in the company through share purchases. It could also be seen that this directly relates to the number of shares issued; this is because most shares have a nominal value of £1, so one share would mean £1 invested in the company.

You just need to remember that share capital relates to the value of the shares at the point they were issued. If these shares were to be sold on to another individual, their sale price might be vastly different from their issue price.

What is the maximum share capital a company can have?

Simply put, there is no maximum share capital a company can have. As long as all shareholders have paid the nominal value of their shares, the company can keep issuing shares.

How do I add new shares to my company?

Companies can add new shares by allotting new shares. Shares are allotted by company directors and are authorised either by the Articles of Association or a company resolution.

When you are issuing new shares, you will need to complete the SH01 form and then file this with Companies House within one month of the allotment.

When filling out the SH01 form, you will need to provide the following information:

  • Company name and number
  • Allotment dates
  • Shares allotted: class, currency, value
  • Statement of capital

Why would I need to add shares to my company?

A private limited company may want to add new shares for several reasons, such as giving employees shares or raising additional capital for the company.

Summing up

These are just a few of the things you need to know about the share capital in a company. You probably have many other questions, such as “what is meant by share class” or “how do I transfer my shares”. Unfortunately, there isn’t room to include all this information in a single post. So keep your eyes posted for future posts which answer these questions.

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