Shareholders are the owners of companies limited by shares. They are also called ‘members’ and they agree to become part of a company by taking a minimum of one share in it. The quantity and value of the shares held by each person represent how much of the business they own. In turn, this determines their decision-making power, their profit entitlement, and the extent of their personal liability for debts.
A shareholder can be an individual person, a group of people, a partnership, another company, or any other kind of organisation or corporate body. As the beneficial owners of a limited company, they are not involved in day-to-day management or financial affairs. These duties are the responsibility of directors. Members do, however, have the ultimate overriding authority and can also appoint themselves as directors. This means you can set up a limited company on your own and assume both of these roles.
- The role of a company shareholder
- What is the difference between a shareholder and a subscriber?
- The difference between a shareholder and a guarantor
- The difference between a shareholder and a director
- Can a shareholder also be a director?
- How many shareholders are required to register a limited company?
- What shareholder information is available to the public?
- What is a corporate shareholder?
The role of a company shareholder
The typical role usually involves:
- Investment in a business.
- Receiving a portion of available profits in relation to their holdings.
- Contributing to company debts up to the limit of their liability.
- Deciding which powers to grant to directors.
- Authorising the allotment and/or transfer of shares.
- Setting the prescribed particulars (rights) attached to shares.
- Making decisions in exceptional circumstances where directors have restricted powers. For example: changing the company structure or name, altering the articles of association, making changes to the shareholders’ agreement.
- Setting directors’ salaries.
- Authorising dividend structures.
- Receiving a portion of surplus capital if and when the company is dissolved.
What is the difference between a shareholder and a subscriber?
A ‘subscriber’ is the term applied to the first members of a private limited company who add their names to the memorandum of association during the company formation process. By doing so, they are agreeing to form, and become part of, the company. Their names are added to the public register and will remain there (and on the memorandum) even if they leave the company.
Any person or corporate body who purchases shares after company formation is not a subscriber. They are simply referred to as a ‘shareholder’, ‘member’ or ‘owner’. Regardless of whether a shareholder becomes a member before or after incorporation, they may also be a person with significant control(PSC).
The difference between a shareholder and a guarantor
Shareholders are the owners of companies limited by shares. Guarantors are the owners of companies limited by guarantee. Both are also referred to as ‘members’ and may also be PSCs of the company.
Shareholders are responsible for contributing toward company debts up to the value of their unpaid shares. Guarantors agree to pay a fixed sum of money, a ‘guarantee’, toward debts.
The owners of a limited by shares company usually receive a percentage of profits in relation to the number and value of their shares. Companies limited by guarantee do not have shares. They are normally set up by non-profit organisations. Therefore, guarantors do not usually take any of the profits for themselves.
The difference between a shareholder and a director
These two roles are completely different. A shareholder is the beneficial owner of a company. They provide financial security to the business, receive a percentage of profits and have ultimate control over how the company is managed by the directors.
A director is appointed to manage the day-to-day operations and finances on behalf of, and for the benefit of, the owners of the business. However, the same person can be both a shareholder and director.
Can a shareholder also be a director?
Yes, the same person can be a director and a shareholder. You can own and manage a company by being the sole member and director. You can be one of many owners and directors. Or you can simply own the business and appoint someone else as a director to manage it for you.
There is no legal limit to the number of owners and directors a company has, so you have the option of bringing in business partners and appointing new directors at any point during the life of your company. However, anyone wishing to be a director should be at least 16 years of age and they must not be an undischarged bankrupt or a disqualified director.
How many shareholders are required to register a limited company?
You need a minimum of one shareholder to register a private company limited in the UK. However, there is no upper statutory limit to the number of owners a company has during or after incorporation.
What shareholder information is available to the public?
Corporate information is disclosed on the UK register of companies to provide openness and transparency to the public. The following shareholder details are registered at Companies House and added to the public register:
- Full name.
- Service/contact address (subscribers and PSCs only).
- Month and year of birth (PSCs only).
- Nationality (PSCs only).
- Country of residence (PSCs only).
- Type(s) of share(s) held.
- Number of shares held of each class.
- Nominal value and currency of their shares.
- Amount paid or due to be paid on each share.
These details will be held and displayed on public record indefinitely, even after a shareholder leaves or the business is dissolved.
Members who join a company after incorporation do not have to provide a service/contact address for the public register, unless they are also a PSC. Furthermore, there is no legal obligation for a subscriber to notify Companies House if their service/contact address changes, unless they are also a PSC.
Directors must ensure this information is also added to the statutory register of members (and PSC register, where applicable) and kept at the registered office address or SAIL address. Statutory registers can be inspected by any member of the public, so they must be kept up-to-date at all times.
What is a corporate shareholder?
A corporate shareholder is a non-human entity that owns a company, i.e. a group, partnership, organisation, firm, etc. Corporate members must appoint an authorised person to act on their behalf by representing their interests, exercising their voting rights and signing any required paperwork.