You have lots of different options regarding how many shares you can issue when setting up a limited company. A minimum of one share must be issued during the company formation process. If you are registering a company with more than one shareholder (member), you need to issue at least one share per member.
There is no upper limit to the total quantity of shares you can issue during or after incorporation, unless you include a provision of authorised capital in the articles of association. Prior to the Companies Act 2006, this was a mandatory clause that applied to all companies limited by shares, but it is now optional.
The quantity of shares you issue depends entirely upon the preference of the original members (subscribers) and whether they plan to sell shares to new investors at some point in the future.
Companies with just one owner will often issue just one share. This means that the shareholder has 100% ownership and control of the business. However, this makes it more complicated to bring in outside investors in the future because you cannot divide one share. You would have to issue new shares if you wanted to sell part of your business to someone else.
A better option is to issue an even quantity like 2, 10, 50, or 100 during the company formation process. This gives you the option of transferring shares (i.e. selling them) to other people in exchange for capital investment, or gifting them to other people such as family members.
Please be aware that members must pay the nominal value of any unpaid shares if the business is wound up, becomes insolvent, or the company requests payment for any other reason. Most companies assign a nominal value of £1 to shares. Therefore, the more shares you issue, the bigger the financial liability of the owners.
It depends on the circumstances of the business. A good solution that many companies adopt is to issue 100 shares because each unit represents 1% of the firm. This makes it easy to work out the extent of each member’s ownership and control. It also limits their financial liability to a reasonable sum.
Furthermore, a quantity of 100 will allow you to sell smaller portions of the company to more people, rather than selling large chunks of ownership to fewer people. This is a good way to raise additional capital for growing the business, so you should bear this in mind when deciding how many shares to issue.
Prior to the introduction of the Companies Act 2006, limited companies were legally required to include authorised share capital in their articles of association. This determined the Stamp Duty they had to pay to HMRC. 100 was the preferred limit because it was a sufficient and logical quantity, and it also restricted the Stamp Duty payment to an affordable amount. Stamp Duty is now only payable if the sale value of a transfer of shares exceeds £1,000.
There is no obligation to pay for shares unless the company is wound up or goes into liquidation. However, since most companies issue shares for the purpose of raising capital, it is common to pay for them upon issue.
Payment must be made into the company’s own funds and recorded in the company’s accounts. Payments can be in cash or non-cash.
If the company is wound up, each member is liable to pay the nominal value of their shares. If they have already paid for their shares, no further payments are due.
However, where they are unpaid or partly paid at the time a company is wound up, the outstanding nominal value must be paid at the director’s request.