What is a shareholder?
This is the name given to anyone who owns ‘shares’ in a company limited by shares. As a shareholder, you own part of a company in relation to the proportion of shares you hold. A company can have just one shareholder or many shareholders. Each one is entitled to receive a portion of profits in relation to the number and value of their shares.
Shareholders are commonly referred to as 'members'. The first members in a company - the people who set register the business and agree to become members - are also known as 'subscribers' because they subscribe their names to the memorandum of association during the company formation process.
Can anyone be a shareholder?
Yes, any person or corporate body (company, firm, organisation etc.) can be a shareholder of a private company limited by shares.
What is the minimum number of shareholders required to register a limited company?
Companies House requires at least one shareholder to incorporate a private company limited by shares. There is no maximum number of shareholders a company can have.
Is a shareholder the same as a director?
No. A shareholder owns a company through the purchase or acquisition of shares; a director is appointed by those shareholders to manage the operational activities of a company.
However, a shareholder can also be a director. This is very common in small companies and start-ups. In many cases, just one person will assume the role of sole shareholder and sole director.
What does a shareholder do?
Shareholders own shares in a company. The ‘nominal’ value of their shares is the amount they are liable to pay toward business debts.
Shareholders receive a portion of company profits in relation to the number and value of their shares.
They are not responsible for the day-to-day activities of the business, unless they are also directors. Company owners will only make decisions about significant matters such as changing the name of the business, appointing or removing directors, changing directors’ powers and altering the articles of association.
What are shares?
A share is a piece of a company limited by shares. Each piece represents a certain percentage of the company. Anyone who owns shares in a limited company is called a 'shareholder' or 'member'.
The number of shares held by each member determines how much of the company they own and control. They normally receive a percentage of trading profits that correlates with their percentage of ownership.
Here are some really simple examples of popular share structures:
- One issued share = 100% ownership of the company.
- Two of equal value = 50% ownership per share.
- 10 of equal value = 10% ownership per share.
- 100 of equal value = 1% ownership per share.
How many shares can a company issue?
The minimum quantity of shares that a company can issue is one. This is common when someone is setting up a limited company as the sole owner and director. There is no upper limit, so you can issue as many shares as you like during the incorporation process of after your company has been set up.
Can I issue different types of shares?
You can create and issue any type you like, whether that is during or after company incorporation. Most companies issue 'Ordinary' shares of equal value, which provide members with equal voting rights and equal profit rights. Alternatively, companies can issue multiple types ('classes') and values of shares to provide members with different voting and profit rights.
How much is a share worth?
Shares have a nominal value and a market value:
- The nominal value, which is usually £1, is the sum that a member has paid, or agreed to pay, for their portion of the company. This is the sum the member is legally required to pay toward company debts or contribute when the business is wound up. Therefore, the nominal value represents the 'limited liability' of a company's owners.
- The market value of a share is the amount it is worth when it is sold. This will vary from the nominal value.
The difference between the nominal value and market value is known as the share ‘premium’.
Can I register a limited company with multiple share classes through 1st Formations?
We provide a specialist Multi-Share Class Package for anyone who wishes to set up a limited company with multiple share classes. This package will also allow you to upload bespoke articles of association, as opposed to adopting Model articles from Companies House.
Incorporation with Companies House will typically take around 3 working hours (subject to Companies House workload), and your new company will be ready to trade on the same day.