This page explains everything you need to know about shares in order to form your company. If your question is not answered here please contact us and we'll be happy to help.
What is a share?
Shares in a company represent ownership. When an individual or company buys shares in a company, they become one of its owners. As such they are entitled to a share of the profits. They are also entitled to be involved in key decisions, such as whether the business should be sold.
What is share capital?
A company that has issued shares is said to have share capital. The amount of share capital is equal to the value of the issued shares. For example, 2 shares issued to shareholders at £1 per share equates to £2 in share capital (2 x £1).
What are the different share classes?
Most companies have only one class of shares - ordinary shares.
Ordinary shares are standard shares with no special rights or restrictions. They usually have the same voting rights as all other ordinary shares (one share, one vote) and are entitled to the same dividends as all other ordinary shares.
If there are other kinds of shareholders then ordinary shareholders are usually the last to be paid if the company is in trouble.
The most common other types of shares are preference shares, cumulative shares and redeemable shares.
What are prescribed particulars of shares?
The features of each class of share are known as their prescribed particulars. Prescribed particulars cover voting rights, rights to dividends and how the shares can be redeemed.
A standard set of prescribed particulars for ordinary shares can be found in the model articles of association. We submit these to Companies House for you automatically with your company formation package.
Setting initial share price
Most UK limited company registrations are performed with a share denomination of £1 per share. This amount is called the share's nominal value and is the amount the shareholder pays to buy the share.
The most common approach is to issue one share at £1 each to each shareholder.
The nominal value may differ over time from the share's market value.
Sale, transfer of shares etc.
In a private or unlimited company, shares are usually transferred by private agreement between the seller and the buyer. The company's rules may limit the way shares can be transferred. The directors' approval will also be needed.
Shares in a public company are transferred through brokers.
Limited companies with one or more shares
A UK limited company must be formed with at least one share. Unless there is a requirement for something more complex, most UK limited company formations will be registered with one share per shareholder.