Share Capital UK: Issue, Alter & Reduce Shares

Overview

Share capital is the total value of the shares a company has issued to its shareholders. Each share has a nominal value (often 1p or £1) and the sum of those nominal values, multiplied by the number of shares in issue, gives the company's issued share capital.

This figure appears in the company's statement of capital filed at Companies House and in its annual accounts. It is worth separating a few ideas that often get muddled. Issued share capital is the value of shares actually allotted to shareholders.

Paid-up share capital is the portion shareholders have actually paid for (shares can be issued partly paid). Called-up share capital is the amount the company has formally asked shareholders to pay. Older companies may still refer to authorised capital, which was the ceiling on what could be issued under the Companies Act 1985, but that concept was largely removed for companies formed under the Companies Act 2006. Most modern companies therefore have no fixed upper limit unless one has been written into their articles.

Key steps

1. Check your current position. Look at your company's statement of capital on the latest confirmation statement (CS01) and your articles of association. This tells you how many shares are in issue, who holds them, their nominal value, and whether your articles impose any cap on issuing further shares.
2. Decide what you want to change. Work out whether you want to issue new shares to bring in investment, transfer existing shares to a new shareholder, create a new class of shares with different rights, or reduce your share capital. Each route has different procedural and tax implications, so it pays to be clear on the goal before acting.
3. Get the right shareholder approvals. Most changes need a board resolution and, depending on what you are doing, an ordinary or special resolution of shareholders. Altering the articles always requires a special resolution (75% in favour). Existing shareholders may also have pre-emption rights that need to be waived before new shares can be allotted to someone else.
4. File the right forms with Companies House. Issuing new shares usually means filing an SH01 within one month. Other common filings include SH02 (subdivision or consolidation), SH03 and SH06 (share buybacks), and a copy of any special resolution. Your next confirmation statement should then reflect the updated statement of capital.
5. Update internal records. Update your statutory register of members, issue share certificates to new shareholders, and keep copies of all resolutions with the company's books. Good record keeping matters if the company is ever sold, audited, or investigated, and it avoids awkward gaps years down the line.

Common questions