Shares and Share Capital 

When a limited company is formed, the people or single person who does so decides whether the member’s liability will be by shares. The association document created when the company is formed should include:

• The share capital that the company will have
• The division of the capital into shares of fixed amounts.

 The members of the company must agree to take some or all of the shares so the company can be registered. The association document must show the names of the share holders, and how many shares each person will take. Public liability companies must have shares allotted with a value of at least £50,000 and at least one quarter of the value must be paid up already upon registration. 

A limited company can increase the share capital by passing a resolution and sending a copy of the resolution to the Companies House within 15 days of resolution approval by the board of directors. 

If the share capital is to be decreased it can be done by ordinary resolution also – for the shares that have not been taken by anyone. The cancellation of shares must also be sent to the Companies House within 30 days of the resolution approval.

Share Types

There is a variety of differnet types of shares and a limited company can have as many different types of shares as it wants to have. Each type of share has a condition attached to it, and are generally divided into the following categories:

·        Ordinary Shares – these shares have no special rights or restrictions and can further be divided into classes of value.

·        Preference – these shares usually have a right that dividens will be paid to these shares preferentially before other shares in other classes.

·        Cumulative preference – these shares maintain the right that if the dividend for one year can not be paid it shall be carried over to the next year, and so on and so forth until the dividends are paid off.

·        Reedemable – These shares are agreed on that the company will by them back either on a fixed date or after a certain period of time. A company must have one other type of share along with redeemable shares, and can not have redeemable shares only.

·        Bearer – These shares denote company ownership and are usually given as share warrants, which is a document that simply states the bearer of the warrant is entitled to the number of shares the document lists.Public limited companies can offer the shares for sale to the public through a stock exchange, however, private limited companies can not offer any shares for sale to the public what so ever.