After forming a company, you’ll inevitably have to make some important decisions. And, if the need arises, one of the biggest questions you’ll have to answer is how to change shareholders at Companies House.
Before you take the necessary steps to change your shareholders, let’s briefly understand the duties and responsibilities of a shareholder and just what those company shares mean for your business.
The Definition of Shares
Shares are a “portion” of a company that is limited by shares. It is simply a divided-up unit of the value of a company (each share is a specific percentage of the entire business). The individuals who own shares of a shareholding company are called “shareholders” or “members” (more on “shareholders” later).
The number of shares held by members reflects how much of a company is owned by them. Typically, shareholders receive a percentage of trading profits in relation to their ownership percentage.
The Value of Shares
Shares have both a market and nominal value — the difference between each is known as a “premium”.
- Nominal value
The nominal value of a share, which is typically £1, is the sum that a member has either paid or agreed to pay for their segment/portion of the company. This sum is the reflection of how much a member would legally need to pay towards company debts or when the company suffers a winding up order. Therefore, the “limited liability” of a company’s owners is reflected in the nominal value.
- Market value
A share’s market value is simply the amount it is worth at the point of being sold. This figure will invariably differ from the nominal value.
The Definition of a Shareholder
Before we look at how to change shareholders at Companies House, let’s firstly confirm our understanding of shareholders. Limited company shareholders (members) form an agreement to become part of a company by investing in at least a minimum of one share.
The number, and value, of shares held by a member reflects how much of the business is owned by the shareholder. And remember, each member/shareholder is entitled to receive a portion of profits in relation to the number and value of their shares.
Subsequently, the amount and value of these shares determines the decision-making authority each limited company shareholder possesses in addition to the extent of their personal liability for debts.
The first members in a company — the people who set/register the business and agree to become members — are also known as “subscribers” because they subscribe their names to the memorandum of association during the company formation process. Incidentally, it’s vital that you find out how to get a copy of memorandum and articles of association.
Who Can Become a Shareholder?
Shareholding companies can have any of the following as shareholders:
- Individual person
- A group of individuals
- Another company/organisation/corporate body
Although shareholders have the ultimate say and authority over important business decisions, they’re not permitted to be involved in the daily management and running of financial matters as this is the remit of the company director.
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. This is common practice in small companies.
How to Add New Shareholders
Understanding the process of adding and removing of shareholders will help answer the question of how to change shareholders at Companies House.
New company shareholders can be appointed at any time after you incorporate your company. In order to successfully appoint a new company shareholder, current members must transfer or sell all existing shares to the forthcoming shareholder. Alternatively, more “share space” can be issued as you can increase your company’s share capital by allotting (issuing) new shares. However, it’s worth remembering that the issuing of new shares will dilute existing shareholders’ percentages of ownership and control. To allot new shares, current members must waive pre-emption rights on the allotment of shares.
The prospective members have to deliver a letter of application to the company, and the board of directors (or members, if required by the articles) must give their approval of the allotment and record it in the register of members. And when it comes to the question of how to change shareholders at Companies House, in order to issue new shares, you have to fill out Companies House Form SH01 “Return of allotment”; subsequently this must be submitted to Companies House within one month of the allotment.
However, in order to transfer company shares, you must complete a stock transfer form with a number of details to hand, such as company and shareholder information.
Note: New member information should be provided to Companies House before, or in time of, the next confirmation statement due date.
How to Remove Company Shareholders
Remember, the question of how to change shareholders at Companies House does not just relate to the inclusion of additional shareholders, but also refers to the removal of existing shareholders.
Therefore, should a member wish to leave a company, their stock must be transferred or sold to another individual. The company directors must be responsible for overseeing the transfer and updating relevant member information at Companies House, as well as in the statutory register of members.
You must simply update the relevant information or shareholder removal in the next confirmation statement and send it accordingly to Companies House. A confirmation statement can be filed online through Companies House WebFiling or with the assistance of a company formation team.
Update Company Shareholders’ Details at Companies House
The public record will disclose all subscribers’ details, including name and contact addresses. Any individual who joins after company formation should only provide their name and share details (unless they are a concurrently a person of significant control).
So, here’s the simple answer to how to change shareholders at Companies House? If company shareholders’ names or shareholdings change at any point, or new members join or existing members exit the firm, Companies House has to be notified on your following confirmation statement.
The director or secretary has full responsibility to ensure that Companies House is notified of these changes.
What to Do When a Company Shareholder Passes Away
When a company shareholder passes away, their shares will form part of their estate, similar to how other types of property would. The authority falls to the executors of the estate (confirmed by a grant of probate) to deal with these shares and enact the individual’s will.
Additionally, Companies House must be notified of the passing of a shareholder on the next confirmation statement. After the transfer of shares to the new beneficiary, you must list the details of the new shareholder as well as reporting the decease date of the previous member — the same process applies for when a member leaves the company for other reasons.
The process of how to change shareholders at Companies House is pretty straightforward if you take note of the above information. However, you must ensure that the correct decisions are made with each removal and appointment. After all, company shareholders have a number of key roles, including everything from deciding which powers to give to company directors, to authorising the structure of dividends.
And remember, companies limited by guarantee have guarantors and a “guaranteed amount” instead of shareholders and shares.
If you want to find out more about how to change shareholders at Companies House, contact our professional and experienced company formations team now for fast, friendly, and comprehensive advice.