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UK Share Capital For Companies Limited By Shares – An Overview

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UK Share Capital For Companies Limited By SharesIn the UK, a company limited by shares must adhere to Parts 17 to 22 of the Companies Act 2006 which provides statutory provisions in respect of a company’s share capital.

The information relating to the company’s share capital must be stated in its memorandum of association, which will also include the following information:

  • Total authorised share capital;

  • Division of share capital; and

  • Names of the subscribers.

Nominal Value Of Shares

In accordance with Section 542 of the Companies Act 2006, each share in a limited company must have a fixed nominal value, e.g., GBP £1.00.  

Share Classes

The share capital of a company can be made up of more than one class of shares, such as ordinary, preference and deferred shares. Different share classes may be established to differentiate rights between shareholders such as voting rights and rights to dividends.  

The division of the class of shares is recorded in the articles of association and the rights attached to a particular class of shares are also either contained in the company's articles or in the terms on which the shares were issued.  

Section 629 of the Companies Act 2006 states that shares are defined as belonging to a certain class if the rights attached to them are the same.  

Therefore, shares will only be of a separate class if the rights attached to them differ from those attached to other shares in the capital of the company, as opposed to simply having a different name of share class.  

Authorised Minimum Share Capital

There is no minimum or maximum share capital for private limited companies. Furthermore, under the Companies Act 2006, there is no requirement for private limited companies to have an authorised share capital.  

Restriction Of Share Capital

A private limited company may limit the number of shares it can issue by including a provision in its articles of association restricting the number of shares that it can issue.  

This provision can be included in the adopted articles of association on incorporation, or added to the articles post-incorporation by way of a special resolution.

Companies Incorporated Before 1 October 2009

Whereby the company is incorporated on or before 1 October 2009, restrictions on the authorised share capital as stated in the company’s memorandum of association can be amended or removed by one of the following methods:  

Special Resolution  

  • Special resolution to adopt new articles that removes any reference to the shares that may be allotted; or 

Statement Of Capital

Companies must file a statement of capital with Companies House in the UK on each of the following occasions:  

Amending Share Capital

Parts 17 and 18 of the Companies Act 2006 state that a company limited by shares may amend its share capital in any of the following ways:

  • Consolidating shares;

  • Reconverting stock into shares;

  • Redenomination of shares;

  • Increasing (or reducing) its share capital;

  • Share buybacks; and

  • Share redemption. 

Understanding The Rules

It is important that private limited companies in the UK are aware of the rules and regulations surrounding limitations on share capital.  

Companies must also be aware of the requirements to file an updated statement of capital with Companies House in the UK if there are any amendments to its share capital.

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