As a rule, it is the shareholders who would own a company that is ‘limited by shares’.
As such, they would have certain rights granted to them for owning a percentage of shares in that particular company.
It is commonplace for company directors to need a vote and agreement from shareholders to make changes to the company.
Directors must report certain changes. Check a list of company changes you must report to Companies House.
In most cases, a private limited company issues ‘ordinary’ shares to its shareholders. As such, the directors would get one vote per share on company decisions.
As a rule, they would also receive dividend payments based on any profits made by the private limited company.
How to Work Out Company Shares
There has to be at least one (1) shareholder in any company ‘limited by shares’. The same person can also be a director of the company if there is only one shareholder.
Being the only shareholder means you would own 100% of the company. There is no upper limit to the number of shareholders that a company can have.
There are no restrictions on the price of an individual share. They can be of any value. But, shareholders must pay for their shares in full if the private limited company was to shut down.
Note: You can limit the liability of company shareholders to a reasonable amount. For example, choosing a low share value of £1 per share would reduce the financial risk.
Issuing Initial Company Shares
You must provide certain information about the shares when you register your company. A ‘statement of capital’ provides the share details. Thus, as part of issuing your initial shares you must provide information on:
- The ‘share capital’. This refers to the number of shares (of each type) that the company has and their total value.
- The ‘subscribers’ (or members). This relates to the names and the addresses of all the shareholders in the company.
An Example: If a private limited company issues 300 shares at £2 each it would have a share capital of £600.
Prescribed Particulars of Shares
You must also provide information on what rights each type of share gives to the shareholder. Thus, information on the ‘class’ and ‘prescribed particulars’ must include:
- How many votes the shareholder would get.
- How much they would get as a share of the dividends.
- Whether they can ‘redeem’ or exchange their shares for money.
- Whether they would be allowed to vote on certain matters relating to the company.
ALSO IN THIS SECTION
Appoint Directors and a Secretary | The legal process of appointing directors and company secretaries.
Memorandum and Articles of Association | How memorandum of association and ‘model articles’ work.