Shareholders and guarantors

Most limited companies are ‘limited by shares’. This means they’re owned by shareholders, who have certain rights. For example, directors may need shareholders to vote and agree changes to the company.

Companies limited by guarantee have guarantors and a ‘guaranteed amount’ instead of shareholders and shares.

Most companies have ‘ordinary’ shares. This means directors get one vote on company decisions per share and receive dividend payments.

Work out your shares

A company limited by shares must have at least one shareholder, who can be a director. If you’re the only shareholder, you’ll own 100% of the company. There’s no maximum number of shareholders.

The price of an individual share can be any value. Shareholders will need to pay for their shares in full if the company has to shut down. You can choose a low share value (for example, £1) to limit the shareholders’ liability to a reasonable amount.

Issuing your initial shares

When you register a company you need to provide information about the shares (known as a ‘statement of capital’). This includes:

  • the number of shares of each type the company has and their total value - known as the company’s ‘share capital’
  • the names and addresses of all shareholders - known as ‘subscribers’ or ‘members’

Example
A company that issues 500 shares at £1 each has a share capital of £500. Share capital is not linked to how much the company is worth.

Prescribed particulars

You also need to include information about what rights each type of share (known as ‘class’) gives the shareholder. This information is known as ‘prescribed particulars’ and must include:

  • what share of dividends they get
  • whether they can exchange (‘redeem’) their shares for money
  • whether they can vote on certain company matters
  • how many votes they get

Companies limited by guarantee

You must have at least one guarantor and a ‘guaranteed amount’.

Guarantors:

  • are company members
  • control the company and make important decisions
  • do not usually take profit from the company - instead the money is kept within the company or used for other purposes

Guaranteed amount

Guarantors promise an agreed amount of money to the company if it cannot pay its debts. This is the ‘guaranteed amount’.

They must pay the company the full amount of their guarantee.

This payment covers guarantors for situations such as the company being closed down. The guaranteed amount is not linked to how much the company is worth - you choose how much they pay.

  1. Step 1 Check if setting up a limited company is right for you

    1. Check what a private limited company is

    How you set up your business depends on what sort of work you do. It can also affect the way you pay tax and get funding.

    Check if you should set up as one of the following instead:

    1. Get help deciding how to set up your business
  2. Step 2 Choose a name

  3. Step 3 Choose directors and a company secretary

    You must appoint a director but you do not have to appoint a company secretary.

    1. Find out what directors are responsible for
    2. Check who can be a director or company secretary
  4. Step 4 Decide who the shareholders or guarantors are

  5. and Identify people with significant control (PSC) over your company

    For example, anyone with voting rights or more than 25% of the shares.

    1. Find out what counts as a PSC
  6. Step 5 Prepare documents agreeing how to run your company

    You need to prepare a 'memorandum of association' and 'articles of association'.

    1. Find out how to create a memorandum and articles of association
  7. Step 6 Check what records you'll need to keep

  8. Step 7 Register your company

    You'll need to register an official address and choose a SIC code - this identifies what your company does.

    1. Check the rules for company addresses
    2. Check what your SIC code is
    3. Register your company with Companies House

    Most people can register for Corporation Tax at the same time as registering with Companies House.

    If you cannot, register separately with HM Revenue and Customs (HMRC) after you’ve registered your company with Companies House.

    1. Register with HMRC for Corporation Tax