How Many Shares to Issue
September 29th, 2008 . by GrahamFI was viewing a company formation website over the weekend and came across some references to authorised and issued share capital. Could you confirm exactly what the process is, the website made reference to 1000 shares at £1 per share? Does this mean I have to pay £1000 for the shares in order to complete the registration of a company?
I am basically setting up a company for the near future and for running some possible contract work through it, but I am slightly confused.
If you are able to contact me and advise me on these issues I would be grateful.
Thanks, Graham.
Hi Dominic,
Having 1000 shares of £1 each is the authorised share capital. It does not mean that you have to pay the company £1000; it is merely the number of shares which the company could issue.
Most companies are formed as above but only one share is actually issued. In such cases only £1 is “payable” to the company.
In most cases the £1 is not paid as such and remains outstanding indefinitely. The only circumstances where you would be forced to pay for the shares (whether £1 or £1000) would be if the company was wound up.
Generally, it is better to have a high number of authorised shares so that should the company wish to issue more in the future, it can do so easily. If your company has 1000 authorised shares and issues one or two, then there will be over 900 available to issue later should you wish.
It is just about leaving your options open for the future.
Feel free to consult with an accountant or others so that you feel absolutely confident about what you are doing.
I hope this provides some clarity.
I have submitted a company formation application with only myself as a subscriber, however the company is split 3 ways with each of the other 2 directors owning 1 original share each. Should the other 2 have been included in the document as subscribers and if so how do I amend?
If the company is to be split three ways then the other two persons should have (as you pointed out) been issued a share each and thereby be included on the memorandum and articles of association.
The share position can be easily rectified by using the form 88(2) and issuing one share to each of them.
In terms of adjusting the memorandum and articles, this is not necessary. The document is only supposed to show the details at the time of the incorporation and is rarely adjusted for changes made subsequently. In any case, the other two shareholders can never now be the original subscribers.
On issuing the signed forms 88(2) the shareholding position will immediately be rectified.
The forms should be sent to Companies House at the same time as as the Annual Return.
I hope that this helps to clarify the position.