UK limited companies that are run for profit will normally be ‘limited by shares’ and have shareholders that own the company. These owners are often referred to by different terms including shareholders, subscribers and members, but they are normally referring to the owners of the business.
This article continues our theme of providing an overview of the basic information you may need. Having looked at other topics including company secretaries and registered office addresses we now look at the basics of being a shareholder in a UK company. This information related to typical limited companies that are operated to make profit and not other ‘not for profit companies’.
For a company limited by shares, there must be at least one shareholder appointed at the time the company is formed who is required to own at least one share in the company. Shares are only offered in whole numbers so if there are two, three or more shareholders each must have at least one whole share. You cannot issue fractions of shares. If you wish all shareholders to have an equal right and responsibility then they should have an equal shareholding. Otherwise you can allot the shares at a ratio to give more ownership or rights to one shareholder and less to another.
Company Shareholders are responsible for appointing directors to run the company. Smaller UK companies often have just one shareholder that is also the director of the company. This is common, but other companies have several shareholders and one or more directors. It is worth recognising the difference between shareholders and directors. Shareholders ‘own’ the company, whilst directors make decisions for the good of the company.
Only those first shareholders who subscribe (add) their names to the memorandum of association at the time of incorporation will be called ‘subscribers’. Those who purchase shares after the company is incorporated will be referred to as ‘shareholders’ or ‘members’ only. Subscribers are not automatically afforded more rights and responsibilities or claim to the company than shareholders and members. The term ‘subscribers’ is simply used to distinguish the original shareholders from those who purchased shares after formation.
During the life of the company you are able to appoint and introduce any number of new shareholders or members. This is subject to any clauses contained within the articles of association relating to share capital. The company can issue as many additional shares as required with different names, rights and values.
Adding or Changing Shareholders
Companies House need to be informed of these changes through the filing of the relevant share change forms as soon as possible. You will also need to update the company’s registers which are usually stored at the registered office. Once the share changes have been completed you can submit a new Confirmation Statement to Companies House to ensure the correct shareholder details are held by the Registrar of Companies. This can be done easily online.
Adding new shareholders with the same shares is relatively straight forward. Other adjustments to shares may involve the creation of new shares or cancelling previous share classes. We assist hundreds of customers every year with shareholder documentation so do not hesitate to contact us if you need help.