Share capital is the portion of a company’s capital raised by issuing shares in its ownership. These shares are taken by investors called shareholders in return for cash or other contributions provided for the company. When shareholders want to set up a limited company, they must agree to take some or all shares of the company. This way, they put the initial capital into their company.
An existing limited company can at any time increase its capital by issuing additional shares to its shareholders, staff or to others by private arrangement. Private limited companies by shares are not allowed to offer their shares to the general public, for instance on stock exchanges. That is the crucial distinction between a private (Ltd) and public limited company (Plc), whose shares can be publicly traded. The value of the company shares held by shareholders is called Issued Capital.
A limited company (ltd) may issue different types of shares, i. e. shares with different conditions attached to them. The most popular share types fall into the following categories:
- Ordinary – which are shares with no special rights or restrictions.
- Preference – which are shares with a special right to receive company annual dividends before other classes of shares.
- Cumulative preference – which are shares with a special right that if a company is not able to pay a dividend in one year, it will carry it forward to successive years.
- Redeemable – which are shares to be bought back by either a company or its shareholders after a certain period of time.
Limited companies need to complete a statement of capital as part of their incorporation documents and then as part of their annual return filings. A limited company (ltd) must provide a full list of its shareholders to Companies House on its first annual return after incorporation and then every third annual return.
In their annual returns limited companies must also notify Companies House of all changes of their shareholders list and share capital. All these details of shareholders and share capital are made publicly accessible by Companies House. A full list of shareholders includes the names of shareholders and the number of shares of each class, e. g. ordinary or preference, they have. From 1 October 2008, limited companies (ltd) do not need to provide addresses of their shareholders.