What is the Difference Between Issued Shares and Authorised Share Capital?

/What is the Difference Between Issued Shares and Authorised Share Capital?
What is the Difference Between Issued Shares and Authorised Share Capital?2019-02-01T15:09:01+00:00
authorised or issued shares

Issued Shares and Authorised Share Capital!

Prior to the implementation of the Companies Act 2006 in October 2009 a new incorporation could outline an upper limit of the amount of share capital they could issue. Effectively, the ‘Authorised Share Capital’ was the maximum capital the company is authorised to issue and was defined in the articles of association.

This value, however, was a nominal value and liability only applied to the actual issue shared capital. The issued share capital was commonly less than the total authorised share capital and any shares not allocated were kept in reserve to be allotted at a future date.

Company Formation

£2800
  • Full company documents

What changed?

The authorised share capital capital was abolished when the Companies Act 2006 came into force. At this time, any share capital that was not ‘issued’ to a shareholder was deemed to be superfluous and ceased to exist. There was no longer a ‘share capital’ waiting to be issued.

Since the 1st of October 2009, Companies now just have what is referred to as ‘issued share capital’. This simply means that a fixed number of shares are issued and allotted at the time of incorporation with the potential to add further shares at a later date if required. Adding new shares at a later date is a simple task and you can find more information on our guide to increasing your share capital.

It is important to consider that all issued shares will need to be paid for at some point in the life of the company. This is the underlying reason as to why the majority of new formations are formed with very low share capiatls (e.g. one £1 share per shareholder). Issuing a large aggregate value of shares increases the liability for the shareholders unnecessarily.