How Many Shares In a New Company?

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How Many Shares In a New Company?

You have decided to form a company but you are not sure how many shares you need to issue. UK companies are started to make a profit for the shareholders who are the owners of the company. When forming a new company you will need to issue shares to at least one person.

UK companies that are normal profit-making businesses are called ‘limited by shares’ companies. The owners of the business are issued with shares to represent their ownership or other rights in the company. There is no set amount of shares that have to be issued and no upper limit to the number of shares that you can issue at the time of incorporation or later.

However,  many companies are formed with similar share structures that are popular amongst start-ups.

Multiple Share Class Options

Alternatively, you may create different share classes for each of the owners. This means dividends can be issued to each shareholder separately without diluting ownership of the company (unless you adjust the rights of the shares)

Mr Smith – 1 x Ordinary Class A £1 share
Mrs Jones – 1 x Ordinary Class B £1 share

Or

Mr Smith – 50 x Ordinary Class A £1 shares
Mrs Jones – 50 x Ordinary Class B £1 shares

If the rights attached to each share are the same both shareholders own half the company.

You can split ownership if required by issuing different numbers of shares to different shareholders. If someone wants to maintain a majority holding you could issue shares with different percentages.

Mr Smith – 52 x Ordinary £1 shares
Mrs Jones – 24 x Ordinary £1 shares
Mrs Davis – 24 x Ordinary £1 shares

Or you could issue different names to the shares and issue different amounts.

Mr Smith – 52 x Ordinary Class A £1 shares
Mrs Jones – 24 x Ordinary Class B £1 shares
Mrs Davis – 24 x Ordinary Class C £1 shares

Using 100 shares is common practice when dividing ownership of a company amongst two or more shareholders. However, a company can have just one single share or it can issue thousands. You do not have to round numbers into tens or hundreds. A company can have just 2 or 3 shares issued or thousands of shares in many different classes.

Register Your Limited Company

This information is a simple overview of how some new companies issue shares at the time of incorporation. It is a guide only and not provided as legal advice. We have not discussed the rights that may be issued to shares or considered shareholder agreements and protecting shareholders.

If you are not sure how many shares to issue in a new or existing company we recommend you seek professional advice.

By |2019-02-19T15:48:41+00:00September 15th, 2016|Categories: Companies House, Company Formation, Document Filing|0 Comments

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