All You Need to Know About Limited Company Shareholders
When you’re starting a new company, you must familiarise yourself with the duties and responsibilities of your company’s key individuals, notably your limited company shareholders.
Limited Company Shareholders Defined
Simply put, limited company shareholders own companies limited by shares. They are sometimes referred to as “members” and form an agreement to become part of a company by investing in at least one share (minimum).
How much of a business is owned by limited company shareholders is represented by the number of shares they hold and the value of those shares. Subsequently, the amount and value of these shares determines the decision-making authority each limited company shareholder possesses, in addition to their profit entitlement and the extent of their personal liability for debts.
Who Can Be a Limited Company Shareholder?
Limited company shareholders can be any of the following:
- Individual person
- A group of individuals
- A different company/organisation/corporate body
Limited company shareholders are beneficial owners of limited companies and therefore are not permitted to be involved in the daily management and running of financial matters. Such responsibilities fall in the job remit of a company director.
However, limited company shareholders (or “members”) have the ultimate say and overriding authority regarding important business decisions. Notably, limited company shareholders can appoint themselves as company directors, meaning they can form a limited company by themselves and undertake both shareholder and director roles.
What Are the Duties of Limited Company Shareholders?
The roles of limited company shareholders involve the following:
- Receiving a portion of available profits with regards to their shareholdings
- Deciding which powers to give to company directors
- The investment in a business
- Authorising the structure of dividends
- Contributing to company debts up to the limit of their liability
- Putting in place the set particulars attached to shares
- Appointing and removing directors
- Authorising the allotment and/or transfer of shares
- Decision making in exceptional situations where directors have limited powers (e.g. changing the company structure, changing the name of the company, modifying the articles of association, as well as making modifications to the shareholders’ agreement)
- Setting the salaries of directors
- Acquiring a part of the excess capital with regards to their shareholdings in the event that a company is dissolved
What is the Difference Between a Limited Company Shareholder and Subscriber?
A “subscriber” is the term used to define the first members in a private limited company. During the formation of the company, subscribers will include their names into the memorandum of association, which acts as a confirmation that the original limited company shareholders have agreed to be company members. Their names are included in the public register and remain on the memorandum even if they leave the company. Any person or corporate body who becomes a shareholder after incorporation will not be regarded as a subscriber; instead they will only be called a “member” or “shareholder”.
What Is the Difference Between a Limited Company Shareholder and Guarantor?
While a guarantor owns a company limited by guarantee, limited company shareholders own companies limited by shares. Subsequently, both guarantors and shareholders are regarded as members of a company.
Limited company shareholders generally receive a percentage of company profits with regards to the worth of their shares. Conversely, companies limited by guarantee don’t have shares and are typically set up by non-profit organisations; thus, guarantors do not technically receive a portion of company profits. They are liable for contributing towards company’s debts up to the worth of their shares. While guarantors on the other hand agree to pay a fixed sum of money toward company’s debts in the form of a “guarantee”.
What Is the Difference Between a Limited Company Shareholder and Director?
These two roles are comprehensively different from one another. A director is chosen to manage the daily operations and finances of a company on behalf of, and for the good of, its limited company shareholders. However, the same person can both be a director and a limited company shareholder — the latter being a beneficial owner of the company who offers financial security, receives a share of company profits and holds complete control regarding matters of how the company is managed by directors.
Is It Possible for a Limited Company Shareholder to Also Be a Company Director?
Company directors can also be shareholders in any company limited company by shares. You can dually manage a company as a director and be the sole shareholder. You can either be one of many directors and shareholders or just a shareholder and appoint someone else to assume the role of director to run the company on your behalf. Company formation legislation does not impose a restriction on the number of directors and shareholders a company can have, giving you the option of bringing in extra shareholders and choosing new directors at any time while your company remains in existence.
NOTE: In order to qualify as a company director, you must:
- Be at least 16 years old
- Not be an undischarged bankrupt
- Not be included on the banned directors register
What Limited Company Shareholder Information Is Available to the Public?
In adherence to public transparency, Companies House outlines a number of corporate details on the register of companies:
- Full name
- Contact address (only for subscribers)
- Type(s) of share(s) held
- The number of shares held of each class
- The nominal value of their shares
- The currency of each share
- The amount due to be paid or paid on each share
Even if a company is dissolved, these details will be held and displayed on public record indefinitely.
Any shareholder joining an organisation after it has been incorporated only needs to provide their full name; no contact address is needed, nor is there any legal obligation for subscribers to notify Companies House if their contact addresses change.
Similarly, directors must ensure this information is included in the statutory register of members and held at the company’s certified office or SAIL address. This register can be examined by any member of the public and must be kept current at all times.
What Is a Corporate Shareholder?
A corporate shareholder can be a non-human entity, including: a group, company, partnership, and organisation. Corporate shareholders are required to authorise a person to act on their behalf by indicating their passions, exercising their rights to vote, and signing relevant paperwork.
Don’t be confused by the various terms, including “members” when referring to limited company shareholders. It’s vital to familiarise yourself with the various definitions, roles and responsibilities of limited company shareholders and always remember to update the necessary information as required.
If you want to find out more about limited company shareholders, including their roles and responsibilities, contact our professional and experienced company formations team now for fast, friendly, and comprehensive advice.