Upon incorporation of a company, the members (or shareholders) declared in the memorandum of association are the initial owners of that company, and are known as the ‘subscribers.’ As a shareholder, your name will be entered onto the register of members and your name will also appear on public record with details of your holding.
Are shareholders the owners of a company?
Ownership is determined by a shareholder’s holding in a company vis-à-vis any other shareholders in the company. If you invest £2.00 in a company, and shares are given to you in exchange for your investment, the value of your holding in the company is, at that given moment, worth £2.00. In a limited company, this amount also dictates your maximum financial liability upon dissolution.
For companies with share capital therefore, there is a clear structure with ownership being divided between the members according to their share proportion.
Are shareholders the same as members of a company?
The terms ‘shareholders’ and ‘members’ are one and the same and are often used interchangeably. Private companies limited by shares are by far the most common type of company registered, accounting for 99% of all companies registered.
What is a majority shareholder?
A majority shareholder has more than 50% holding in a company. A 75% majority holding is worthy of mention, legally, due to the strength of position it allows in affording the right to pass special resolutions. A shareholder with a 50% majority may pass ordinary resolutions.
Why does someone have shares in a company?
When a company is registered as ‘limited by shares’, the members of the company each agree to be members, and as shareholders to take at least one share in the company. When you buy shares, you buy a proportion of a company’s assets and profits – as shares denote ownership of a company and represent the amount you invested.
In the pursuit of growth, a company raises capital by issuing shares in the company to investors in return for financial investment. These shares may subsequently be sold by the shareholders (investors) for profit.
What rights do shareholders have?
The rights of shareholders depend on the rights prescribed in the articles of association. Generally, all shareholders of a private company are usually entitled to dividends, the right to notice of general meetings and copies of the company’s reports and accounts.
Shareholders are able to inspect records of minutes of board meetings and copies of all shareholders’ written resolutions.
They are also entitled to payment upon winding up of the company, which may only be the nominal value of the shares they purchased, any further payment will depend on the success of the company or the rights prescribed by the articles.
A company can create classes of shares with as many or as few rights as it wishes.
Can you issue more shares in a company?
It is possible to issue additional shares in a company if permitted to do so by the directors. Then shares can be issued subject to:
- the Companies Act (statutory pre-emption rights)
- any other provisions in the articles
- any shareholder agreements in place
Companies may choose to impose a restriction on the maximum number of shares that can be issued.
Can I transfer my shares to someone else?
Subject to the provisions in the articles of association or any shareholder agreements in place, any legal person (including another company) may hold shares in a company, and can change their shareholdings by transferring or selling shares like any other asset.