For a New Limited Company: Issue 100 Shares for Simplicity or 10,000 for Future Investment
Issuing 100 ordinary shares is the default for most businesses registering a limited company in the UK, as it simplifies ownership percentages, whereas a higher volume is often preferred for future-proofing equity.
Use 100 Shares to Make Percentage Calculations Simple
For a sole founder or a simple partnership with only one shareholder, issuing 100 shares clarifies ownership. If one person owns all 100 shares, they have 100% control. If two founders split them 50/50, each gets 50 shares. Using 100 shares keeps things simple and meets legal requirements with no complexity.
Issue More Shares (e.g., 10,000) to Avoid Complex Share Splits Later
Starting with only 100 shares creates problems when you need to issue a small percentage of the company. Giving an advisor 0.5% would require issuing half a share, which is not possible. Starting with 10,000 or even thousands of shares allows you to issue precise, whole-numbered share amounts to investors, co-founders, and employees under an Enterprise Management Incentive (EMI) scheme.
Protect Your Eligibility for Business Asset Disposal Relief (BADR)
The way you structure your shares when forming a company directly impacts the tax you pay when you sell them. To qualify for the lower Capital Gains Tax rate under Business Asset Disposal Relief (BADR), your shareholding must meet HMRC's criteria, primarily maintaining at least 5% of the ordinary share capital and voting rights.
From , the BADR rate increased from 14% to 18%, raising the cost of an incorrect structure for many limited companies. HMRC will tax shares that do not qualify for BADR at the full Capital Gains Tax rate (currently 24% for higher-rate taxpayers). Consult an accountant during the company formation process if you plan to issue shares to investors or employees to ensure you don't inadvertently dilute your holding below the 5% threshold.
How to Issue Your First Shares and Form a Company
Satisfy the Companies Act 2006 by issuing at least one share
UK company law requires a private limited company to issue at least one share upon formation. A company must issue at least one share with a nominal value, the minimum price at which it is issued, and can be as low as £1. Each shareholder consequently owes the company £1 for that share, though they do not need to pay for their shares immediately. The total number of shares you issue during formation determines who qualifies as a Person with Significant Control (PSC). Anyone who holds more than 25% of a UK limited company's shares is considered a PSC and must verify their identity under the new rules. The requirement applies to all new directors from , while existing directors must be verified by .
Your Share Capital on Form IN01
You issue your initial shares during the company formation process by completing the 'Statement of Capital' section on Form IN01. The statement of capital provides Companies House with a snapshot of your company's shares in issue, including the total number of shares and their nominal value. Your Company Formations’ online portal automatically generates this document when you set up a limited company.
Adopt Model Articles of Association for Standard Rules
Your company's Articles of Association serve as its internal rulebook. The Companies Act 2006 provides standard Model Articles sufficient for most limited companies, including private limited companies. These articles contain all the necessary rules for issuing share certificates and managing an ordinary share structure without needing complex legal drafting.
Issue Share Certificates to All Shareholders Within Two Months
Your UK company legally exists once Companies House approves your application. You then have a legal duty to issue a physical or digital share certificate to each shareholder within two months. The certificate serves as official proof of ownership, even if there is only one shareholder.
Create the Company's Statutory Register of Members
Every UK limited company must maintain a set of internal records called statutory registers. You must first create the register of members. This record lists all shareholders, their addresses, and the number of shares a company has issued to them.
Own Shares in a UK Limited Company From Abroad, But Get a Visa to Work In It
For non-resident company formation, the law allows founders to own a UK company without the right to work in the UK.
Understand You Can Own Shares Without a UK Work Visa
You do not need to be a UK resident or have a visa to be a shareholder in a UK limited company. The right to form a company and own its shares is separate from the right to work for it as a director or employee. UK immigration rules govern the right to work in the UK.
Use a Simple Share Structure to Simplify Cross-Border Tax Reporting
A clean, simple share structure with a single class of ordinary shares makes international tax compliance and reporting far easier.
Use Form SH01 to Issue More Shares or Create New Share Classes
File Form SH01 to issue new shares after incorporation
If you need to create more shares after your company is running, for example, to bring in a new investor, you must file a Form SH01 (Return of Allotment of Shares) with Companies House within one month of issuing the new shares. The form includes an updated statement of capital.
Consider different share classes for investors or employees
While starting with ordinary shares is best for most businesses, you can create different classes later if your articles of association permit. These might include preference shares that pay a fixed dividend, or non-voting shares for employees. Hire an accountant to create complex structures, such as alphabet shares, to ensure they meet your specific goals.
Frequently Asked Questions
What is the difference between issuing new shares and transferring existing ones?
Issuing new shares in a private limited company creates fresh equity, which can dilute the ownership percentage of existing shareholders. The company must file a Form SH01 with Companies House to report these new shares. Transferring existing shares moves ownership from one person to another without creating new equity. A transfer does not require a Companies House filing, but you must record the transaction in the company's internal statutory registers.
