The share capital in a private limited company by shares is the amount of money invested by its owners in exchange for shares of ownership of the company. These shares are taken by investors who are called company shareholders in return for cash or other contributions provided for the company. All shareholders must agree to take some or all shares of the company at the time of incorporation. This way, shareholders put the initial capital into their company.
Share capital can be increased at any time by issuing additional shares to the shareholders, staff or to others by private arrangement. However, private limited companies are not allowed to offer their shares to the general public, for example on stock exchanges. That’s the main difference between a private (Ltd) and public limited company (Plc), whose shares can be publicly traded. Issued Capital is the value of the company’s shares held by its shareholders.
A private limited company may issue different types of shares, with different conditions attached to them. In majority of cases share types fall into the following categories:
- Ordinary shares – the most popular, shares with no special rights or restrictions.
- Preference shares – shares with a special right to receive company annual dividends before other classes of shares.
- Redeemable shares – shares to be bought back by either a company or its shareholders after a certain period of time.
- Cumulative preference shares – 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.
Every limited company must complete a statement of capital as part of its incorporation documents and then as part of the annual Confirmation Statement. A private limited company must provide a full list of its shareholders to Companies House on its first annual Confirmation Statement.
When filing their first Confirmation Statement, companies must also notify Companies House about all changes of their shareholders list and share capital. Information of shareholders and share capital are made publicly accessible by Companies House.