Issuing the first shares in a new company<\/h2>\n
When a limited by shares company is set up (registered\/incorporated) at Companies House, the subscribers (i.e., the first shareholders\/members)\u00a0 choose how many shares to issue. This information will be included on the company formation application form, with the name of each subscriber also added to the company’s memorandum of association<\/a>.<\/p>\n
The minimum requirement is one share. There isn\u2019t usually an upper limit to the number of shares issued unless the subscribers choose to add a restriction in the articles of association<\/a>.<\/p>\n
If you\u2019re setting up a company on your own (as the only shareholder and director<\/a>), you may wish to issue just one share to yourself. This will represent the whole company (100%), so you will have full control of the business and be entitled to all available profits.<\/p>\n
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\n <\/a>\n <\/div>\n \nAlternatively, you may want to issue more shares to yourself, or to other people if you are setting up the company with one or more business partners.<\/p>\n
Normally, even numbers of shares are preferred, such as two, four, six, eight, ten, 100, etc. This makes it easier to work out each shareholder\u2019s percentage of ownership and, therefore, the percentage of company profits they are entitled to receive.<\/p>\n
Examples of equal share divisions:<\/p>\n
- \n
- Two shares – Each share represents 50% ownership of the company<\/li>\n
- Five shares – Each share represents 20% ownership<\/li>\n
- Ten shares – Each share represents 10% ownership<\/li>\n
- 50 shares – Each share represents 2% ownership<\/li>\n
- 100 shares – Each share represents 1% ownership<\/li>\n
- 1000 shares – Each share represents 0.1% ownership<\/li>\n<\/ul>\n
- \n
- a company is owned by two people<\/li>\n
- one shareholder has one share worth \u00a31.00; the other has one share worth \u00a30.20<\/li>\n
- the former shareholder owns 83% of the company, whilst the latter holds 16.67% of the company<\/li>\n<\/ul>\n
When setting up a company, the decision is often based on the amount of capital invested by each member. Usually, the more you invest, the bigger your shareholding will be.<\/p>\n
Different types of limited company shares<\/h2>\n
There are many different types, or \u2018classes\u2019, of limited company shares, including:<\/p>\n
- \n
- Ordinary shares<\/li>\n
- Preference shares<\/li>\n
- Cumulative preference shares<\/li>\n
- Non-voting shares<\/li>\n
- Redeemable shares<\/li>\n
- Alphabet shares<\/li>\n
- Management shares<\/li>\n<\/ul>\n
If your company is small and\/or you\u2019re setting up on your own, Ordinary shares should be sufficient for your needs. This is the most popular class, so you probably won\u2019t have to worry too much about all of the different classes we\u2019ve listed. Nevertheless, it\u2019s handy to have a basic understanding of the various share classes available to you.<\/p>\n
Ordinary<\/h4>\n
A standard type of share with no special rights or restrictions attached to it.<\/p>\n
Each share provides equal rights to shareholders: the right to cast one vote at general meetings, the right to receive dividends (profits), and the right to a percentage of any remaining capital or assets when the company is wound up.<\/p>\n
Members can own multiple shares, which gives them proportionately more rights and control than those with fewer shares.<\/p>\n
Preference<\/h4>\n
Typically, this class carries a right to preferential treatment when dividends are paid out.<\/p>\n
The holder of a preference share would receive a fixed dividend sum (rather than a percentage of overall profits) before other shareholders receive their dividends. This is beneficial in situations where the business is facing financial difficulty. However, the shareholder could lose out if business profits increase. Often, preference shares carry no right to vote at general meetings.<\/p>\n