When you’re setting up a limited company through Companies House (or using our Company Formations service), you’ll encounter a question about shares and their value. 

Limited companies need to answer this question because it establishes a potential owner’s financial liability if the business falls into debt. 

Understandably, knowing how to set the correct share value can be an intimidating concept if you’re new to the world of business. To do that, you’ll need to understand what shares are, the role they play in your business, and the relationship between shares and liability. 

Luckily, you’re in the right place. On this page, we’ll explore the ins and outs of shares and share capital – explaining everything in plain English to help you get started. If you’re still struggling and need more support, you can also read our complete guide on how to incorporate a limited company. 

What are shareholders?

Shareholders are individuals or corporate entities who own shares in a limited company. They own a part of a company directly related to the proportion of shares they hold. A shareholder doesn’t have to be a director or even engage in the day-to-day activities of the company. 

Your limited company must always have at least one shareholder, but there’s no upper limit on how many you can have

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What are a shareholder’s duties?

Each shareholder has an official say on major corporate decisions relating to the company; also known as voting rights. The person with the most shares has the most voting rights (this is sometimes referred to as having ‘controlling interest’). 

Shareholders are liable for the debts of a limited company, but only up to the total nominal value of the shares that they own. (Keep reading to learn more about nominal value, or read ‘Am I liable for the debts of my limited company’). 

Dividends (payments from the company’s profits after tax) can be issued to shareholders based on the number of shares they hold, at the discretion of the company directors.

What is a subscriber? 

A subscriber is a technical term that describes a shareholder who is present when a company is first formed. To be a subscriber, your name must be present on the memorandum of association, which is completed during the company’s formation. Subscribers are added to the Companies House register and will remain there even if they leave the company. 

Any individuals or corporate bodies who become shareholders after incorporation cannot be deemed subscribers and are instead referred to as shareholders or members. 

Aside from playing a crucial role in the formation of a business, subscribers have no special privileges compared to other types of shareholders. 
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What are shares?

Shares define how the ownership of your company is divided up. Shares define the following things:

• Shares indicate ownership of a company.
• They act as a means to raise capital for a business.
• They give shareholders votes that they use to exercise control in the running of a company. 

Every limited company must issue at least one share when they are set up. There’s no upper limit on shares, and you can set as many as you like – but most people stick to 10, 100 or 1000. 

Every share that you issue represents a percentage of ownership in the business. The more shares issued, the smaller the percentage of ownership each one represents. This breaks down as follows (assuming all shares are of equal value):

• 1 issued share: represents 100% ownership. 
• 2 issued shares: 50% each. 
• 10 issued shares: 10% each. 
• 100 issued shares: 1% each. 

Deciding on how many shares to issue will depend on how many potential owners you have or want to have in the future. The more shares issued, the easier it is to split ownership evenly between multiple shareholders. For example, if you have four potential owners, you could issue 100 shares and allocate 25 (representing 25%) to each shareholder to keep things equal.

What is the nominal value for shares?

UK law requires every share to have a fixed monetary value, known as a ‘nominal value’. 

When deciding on how many shares to issue, you need to decide on a nominal value. When you form a company, you’ll set a nominal value for every share which acts as the minimum possible amount a share can be sold for. This can be any figure you want, but is usually kept to a small, manageable figure such as 1p, 10p or even £1. Every share you issue must then be paid for by the shareholder using that nominal value. 

Nominal value affects the total liability of a shareholder, so it’s generally set as a low figure such as 1p or £1. A company that issues 100 shares at £1 each has a total nominal value of £100. A sole owner with 100% ownership would therefore have to pay the £100 nominal value to the company and then be liable for £100. 

Setting a sensible nominal value is incredibly important for new businesses. Creating 10,000 shares at £1 each would mean shareholders needed to pay £10,000 into the company right at the start. 

What is share value?

When discussing share value, you need to consider either nominal value or market value. We’ve covered nominal value in the question above, so we’ll address market value here…

Market value 

A share’s market value is how much a share is worth when it is sold. This value depends on how your business is performing in the market and what buyers may be prepared to give you. Market value is often based on factors such as stock/assets, trading history, profit/loss, etc. 

The difference between market value and nominal value is known as a share premium.

Share premium 

Share premium refers to the money received for shares sold above the company’s nominal value. If your shares held a nominal value of £1 each and you decided to sell them at a market value of £10 each, you’d be gaining £9 in share premium for every share sold. 

If you’re planning to sell shares at a premium, you should work with an accountant. This is because share premium funds are treated differently from other types of capital and must be accounted for in a different way via a share premium account. 

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Answering FAQ about company shares

1. How much should I value each share in my company at?

If you’re the sole director of a new company, then the easiest thing to do is create hundred shares at the value of £1. This will give you 100% of the company with a share capital of £100. We’d generally recommend this when starting out as it keeps things nice and simple.

Similarly, if there are two directors, you can issue 50 shares to each at the value of £1 each. This will give both of you 50% of the company with a share capital of £50 each.

If you want an uneven divide of the company (i.e one director owns more of the company than the other) you can split the 100 shares further. - for example, you could divide the 10 shares so that one director has six shares (60%) whilst the other has four shares (40%).

There’s no such thing as half a share, so if you want an even more specific division of the company, then you can always have more than 100 shares at £1 each and then divide them accordingly.

Of course, you can always issue more shares later when you need to. However, there are tax and accounting implications to this, so please consult an expert.

2. What is share capital?

Share capital is the total value of shares that have been issued. From a legal point of view, that means the total nominal value of all shares. For example, if you issued four shares with a nominal value of £1 each, the share capital of the company would be £4.

3. What are share classes?

Share classes are typically used if company owners want to assign different rights to different groups of shareholders. For example, a company’s founders may issue themselves class A shares, which give them enhanced voting rights, while selling class B shares to investors. This allows them to remain in control of their company even if they sell the majority of their limited company to a third party.

Typically, share classes are not required for new limited companies, and we do not offer the facility to define share classes when incorporating. However, different share classes can be formed subsequent to incorporation should they be required. This can complicate your accounting and dividend issuing, so for new limited companies with only one director, we do not usually recommend multiple share classes.
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Still unsure about shares?

We recognise that most people who are new to running a business don’t need to know the ins and outs of shares and just want to focus on getting set up in the best way possible. 

With that in mind, we’ve answered all of the most common share-related questions with our guide to ‘how many shares should I start my company with’. 

If you're still unsure and you’d like to speak to someone, one of our advisors will be happy to explain shares further. Give us a call on the number at the top of this page, or email advisors@crunch.co.uk and we’ll get back to you as soon as we can.

The way you structure a business can be very complex and therefore might need bespoke legal and tax advice. Please note that Crunch can only offer support to simple companies with basic structures, and we don’t advise on any legal work that might need to be done alongside a company restructure or company formation