When forming a company, you’ll have to familiarise yourself with your shareholding company’s key terms and definitions, including “shares” and “shareholders” and what these terms mean for your business.
In order to understand the duties and responsibilities of a shareholder, it’s important to recognise just what those shares are with simple examples of their purpose in a shareholding company.
What Are Shares?
Shares are a part or “portion” of a company that is limited by shares and is simply a divided-up unit of the value of a company (each share is a specific percentage of the entire business). The shares owned by individuals of a shareholding company are called “shareholders” or “members” (more on “shareholders” later).
How much of a company is owned or controlled by a member is reflected in the number of shares that the member holds. Typically, shareholders receive a percentage of trading profits in relation to their ownership percentage.
What Is the Value of a Share?
Shares have both a market and nominal value — the difference between each is known as a “premium”.
- Nominal value
The nominal value of a share, which is typically £1, is the sum that a member has either paid or agreed to pay for their segment/portion of the company. This sum is the reflection of how much a member would legally need to pay towards company debts or when the company suffers a winding up order. Therefore, the “limited liability” of a company’s owners is reflected in the nominal value.
- Market value
A share’s market value is simply the amount it is worth at the point of being sold. This figure will invariably differ from the nominal value.
How Many Shares Can be Issued by a Company?
One (1) is the minimum number of shares that a company may issue. This is normal when an individual sets up a limited company and is the sole owner and director. There is no upper threshold, therefore…
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Can Different Types of Shares Be Issued?
Owners of a shareholding company can form and issue whatever type of shares they like. This can be done during company registration or once your company has been incorporated. Many companies prefer…
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What Is a Shareholder?
Shareholders are any individuals who own shares in a shareholding company — that is, a company limited by shares.
Limited company shareholders (members) form an agreement to become part of a company by investing in at least a minimum of one share.
The number, and value, of shares held by a member reflects…
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Who Can Become a Shareholder?
What is the Difference Between a Shareholder and Subscriber?
What Are the Roles of a Shareholder?
