What is a company shareholder

Shareholders are the owners of limited companies

What is a company shareholder?
Shareholders, known as members, are the owners of companies and can be a person, group of people or another company.

What do shareholders do?

The typical role of a shareholder is:
  • invest money in a company
  • liable for company debts up to their limit of liability e.g. their share
  • granting powers to directors
  • authorising share allotments
  • receive profit shares from the company
  • making decisions in exception circumstances

What are the liabilities of shareholders?

The amount of money a shareholder is liable to contribute towards any debts of a company is limited to the 'nominal' value of the share a shareholder holds and which has already paid against their 'paid up shares'.

In some circumstances, the shareholder has not paid, or partial paid for their shares. In these circumstances, the shareholder is liable to pay immediately the nominal value of these unpaid shares.

Who can be a shareholder?

Unlike a company director, anyone can be a shareholder of a limited company and there are no restrictions on age or any exclusions list. It is also common for shareholders to be a limited company, especially where there is a group structure.

How many shareholders can I have?

There is no limit on the number of shareholders a limited company can have, except that there must be at least one shareholder.

What is the difference between a director and a shareholder?

Shareholders own the company and directors manage the company on their behalf. To become a shareholder, you must buy at least one share issued by the company.

It is very common that a director is also the main, or only shareholder in the limited company

Is there a limit on the number of shares I can issue?

Most limited companies are required to issue at least one share. Unless the company will be owned by numerous shareholders from the start, it is common for a limited company to be set up with only one share, initially.

While there is no upper limit on the number, or value of shares a company can have, care must be taken that these should be 'paid up', otherwise shareholders will be liable for any debt the company builds up and consequently, cannot pay.

Can a company have different types of shares?

There can be many different types of share types within a company. Most companies issue 'Ordinary' shares initially and these usually provide equal rights to all shareholders, including voting rights, the issue of dividends and share capital rights.

However sometimes, especially where there are numerous shareholders, a company can issue different types of shares that all carry different rights within the company. The company's articles of association usually state how and when a company can issue multiple classes of shares.

How much are shares worth?

There are usually two valuations of how much a share is worth. The 'nominal' value of a share can be set upon the share being issued. In most cases, the 'nominal' value is £1.00. The nominal value of a share also sets the limits of liability on each shareholder.

The market value of a share will fluctuate . This is usually the value that is put on a share if it were to be sold at 'market rate'. This value will fluctuate based upon profitability, market conditions or trading styles of the company.

The difference between the nominal value of a share and its market value is commonly known as the share 'premium'.

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