Shareholders, also known as a ‘members’, are the owners of companies limited by shares. A company shareholder can be an individual person, a group of people, a partnership, another company, or any other kind of organisation or corporate body.
To be a shareholder, you must take a minimum of one share in a company. The number and value of shares held by each member represents how much of the business they own. In turn, this determines their decision-making powers, their profit entitlement, and their extent of personal liability for company debts.
As the beneficial owners of a limited company, shareholders are not involved in day-to-day management of the business. These duties are the responsibility of directors. They do, however, have ultimate authority and control of the company, and they can also appoint themselves as directors. This means that you can set up a limited company on your own by taking shares and appointing yourself as a director.
The role of a company shareholder
The typical role of a company shareholder involves:
- investing money in the business
- receiving a portion of company profits in relation to their shareholdings
- contributing to company debts up to the limit of their liability
- deciding which powers to grant to directors
- authorising the allotment and transfer of company 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, and 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 company shareholder and a subscriber?
A ‘subscriber’ is the term applied to the first members (shareholders or guarantors) of a private limited company. They 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 also added to the public Companies House register and will remain there (and on the memorandum) even if they leave the company.
Any person or corporate body who becomes a shareholder 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 during or after incorporation, they may also be a Person with Significant Control (PSC).
The difference between a company shareholder and a guarantor
Shareholders are the owners of companies limited by shares. Guarantors are the owners of companies limited by guarantee. Both are referred to as ‘members’ and may also be PSCs of the company.
Shareholders are responsible for contributing toward company debts up to the nominal value of their unpaid shares (usually £1/share). Guarantors agree to pay a fixed sum of money (a ‘guarantee’) toward debts.
Shareholders 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, which means that guarantors do not usually take any company profits for themselves.
The difference between a company 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 company director is appointed to manage the day-to-day operations and finances on behalf, and for the benefit, of company shareholders. 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 company shareholder and director. This means that you can:
- own and manage a company by yourself by being the sole member and director
- own and manage a company with other individuals by being one of two or more owners and directors
- own the business and appoint someone else as a director
There is no legal limit to the number of shareholders 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.
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 by shares in the UK. However, there is no upper statutory limit to the number of members a company has during or after incorporation.
What shareholder information is available to the public?
To provide openness and transparency to the pubic, corporate information is disclosed on the UK register of companies. The following shareholder details are registered at Companies House and added to the public register:
- full name
- service address (only required if the shareholder is a subscriber and/or PSC)
- 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
If a shareholder is also a Person with Significant Control, they will have to provide the following additional information for the public register:
- month and year of birth
- country of residence
All of these details will be held and displayed on public record indefinitely – even after a shareholder leaves the company and when the business is dissolved.
Directors must record this information in the company’s register of members (and PSC register, where applicable), which must be 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 shareholder (i.e. another limited company, a partnership, an organisation, etc). Corporate members must appoint an authorised person to act on their behalf. This individual will represent the corporate shareholder’s interests, exercise their voting rights, and sign any required paperwork.