Issuing shares
From Norfolk RCC
Issuing shares can be a good way for organisations to raise the necessary capital to develop ideas and projects. It can also be a way of create a very real ownership of an initiative within a community.
To issue shares an organisation must be constitute either as a company limited by shares (can include a community interest company) or as a public limited company. For more information on legal forms please see the legal structures page.
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Share Capital
The amount of share capital stated in the memorandum of association is the company's 'authorised' capital, this is the total amount that can be issued as shares. There is no maximum to any company's authorised share capital and no minimum share capital for private limited companies. However, a public limited company must have an authorised share capital of at least £50,000.
A company can increase its authorised share capital by passing an ordinary resolution (unless its articles of association require a special or extraordinary resolution). A copy of the resolution and notice of the increase on Form 123 must reach Companies House within 15 days of being passed. No fee is payable to Companies House.
A company's authorised share capital is divided into shares of a nominal value. The real value of the shares may change over time, reflecting what the company is worth, but their nominal value remains the same. When the company sells shares for more than their nominal value, the actual sum paid will be in two parts - the nominal value and a share premium. The share premium must be recorded separately in the company's financial records in a 'share premium account'.
Allotting Shares
Allotment is the process by which people become members of a company (shareholders). Subscribers to a company’s memorandum agree to take shares on incorporation and the shares are regarded as 'allotted' on incorporation.
Later, more people may be admitted as members of the company and are allotted shares. However, the directors must not allot shares without the authority of the existing shareholders. The authority will either be stated in the company's articles of association or given to the directors by resolution passed at a general meeting of the company.
Issued capital is the value of the shares issued (allotted) to shareholders. This means the nominal value of the shares rather than their actual worth. The amount of issued capital cannot exceed the amount of the authorised capital but it is not necessary to issue all of the authoried capital at once.
A notification must be sent to companies house within one month of shares being allotted. This is done using a form 88(2). There is no fee for this.
Share Types
A company may have as many different types of shares as it wishes, all with different conditions attached to them. Generally share types are divided into the following categories:
- Ordinary As the name suggests these are the ordinary shares of the company with no special rights or restrictions. They may be divided into classes of different value.
- Preference These shares normally carry a right that any annual dividends available for distribution will be paid preferentially on these shares before other classes.
- Cumulative preference These shares carry a right that, if the dividend cannot be paid in one year, it will be carried forward to successive years.
- Redeemable These shares are issued with an agreement that the company will buy them back at the option of the company or the shareholder after a certain period, or on a fixed date. A company cannot have redeemable shares only.
Share certificates
A company may choose to issue share certificate. Off the shelf share certificate are often available in packs from stationers, alternatively a company may produce its own. If so then these must contain the following information:
- Your company name
- The type of share you are issuing
- The name and address of the shareholder
- The number of shares in words that are to be assigned to the shareholder
- The value of the share
- A signature from a director and secretary of the company
An example certificate is available here
Further information can be found in the companies house publication share capital
