Frequently Asked Questions
- What is the difference between a shareholder and a director?
- A shareholder of a company is an owner of the company. They purchase shares in the company. Shareholders are often know as members and are technically not responsible for the running of the company. In contrast, a director is appointed by the shareholders to run the company on their behalf. A Director does not own the company. However in practice, for many small companies the Director will be the same person as the shareholder.
- What is the minimum amount of share capital a company can issue upon incorporation?
- A company must have a minimum of one shareholder with one share issued in order for the company formation to be completed. However in practice most companies issue more than this at incorporation and we normally advise to issue 100 shares simply to make distribution of ownership easier at a later stage if you decide to do so.
- Can a director or Company Secretary also be a shareholder?
- Yes, a director or Company Secretary may also be a shareholder of that company. This is particularly common, especially amongst smaller companies or larger companies who offer employee share schemes.
- Can a non UK resident be a shareholder?
- Yes, a non UK resident individual or business can be a shareholder of a UK limited company.
- Do I need to have authorised share capital?
No, this is because since the Companies Act 2006 came into force it is no longer a legal requirement for a company to have an authorised share capital.
This means that the company can continue to issue shares subject to the usual director and shareholder approval. If shareholders want to control the number of shares that can be issued, they can now seek to do so via the Articles of Association or shareholders agreement.
- What is the difference between ordinary and preference shares?
- Preference shares differ from ordinary shares as the shareholders have different rights. Normally for preference shareholders this will include preferential payments of dividends, rights to the assets upon winding up of the company and the status of a preferential creditor. The dividends paid to preference shareholders tend to be more fixed and therefore do not vary so much with the profitability of the company. For this reason, the value of preference shares tends to be relatively stable.
- What can I do if I want different share classes?
- A class of shares simply defines a group of shares that have particular rights attached to them. It is not normally necessary to set up this type of arrangement and therefore is rarely required. If you think this is required for your company, please call the Wisteria Formations Customer Support Team to discuss this further.