Increase authorise shares capital - £ 50     Transfer of shares - £ 65     Allocation of new shares - £ 65

When people form a company, they decide whether to limit the members' liability by shares. The memorandum of association (a document required in the company's formation) must state:

• The amount of share capital the company will have; and
• The division of the share capital into shares of a fixed amount.

On registration of the company at Companies House, members of the company (the 'shareholders') must agree to take some, or all, of the shares. The memorandum of association must show the names of the people who have agreed to take shares and the number of shares each will take. These people are the subscribers.

Public Limited Companies and the 'authorised minimum'

A public limited company cannot conduct business or exercise borrowing powers unless and until it has obtained a trading certificate from Companies House, confirming that it has the minimum allotted share capital. This is the 'authorised minimum'. In order to satisfy the requirement and obtain a trading certificate, the company must have either a minimum of £ 50,000 of allotted share capital denominated in sterling or a minimum of € 65,600 of allotted share capital denominated in euros. The company cannot satisfy the requirement by a combination of euro and sterling shares or by shares in any other currency. Further, a share allotted in pursuance of an employees' share scheme can only be counted towards satisfying the authorised minimum if at least 25% of the nominal value of each share and any premium is paid up.

A company re-registering from a private company to a public company does not have to apply for a trading certificate. But in order to re-register, the nominal value of its allotted share capital must be not less than the authorised minimum and each of its allotted shares must be paid up as to at least 25% of its nominal value and the whole of any premium (although certain shares can be disregarded). The company must satisfy the authorised minimum, for the purposes of re-registration, either by means of sterling shares with a total nominal value of at least £ 50,000 or by means of euro shares with a total nominal value of at least €65,600. It cannot satisfy it by a combination of euro and sterling shares or by shares in any other currency.

If a company applying for a trading certificate or for re-registration is capable of satisfying the authorised minimum either in euro shares or in sterling shares, it must choose in its application which currency to rely on. A company that is re-registering from private to public must complete Form 43(3).

What is issued capital?

• Issued capital is the value of the shares issued to shareholders. This means the nominal value of the shares rather than their actual worth.
• A company may increase its issued capital by allotting more shares, but only up to the maximum allowed by its authorised capital (i.e. a company's issued share capital cannot exceed its authorised share capital); it must make allotments under proper authority (see question 7).
• A public company may offer shares to the general public in a prospectus or by listing particulars. For more information on prospectuses and listing particulars,
• A private company may normally only issue shares to its members, to staff and their families, and to debenture holders. However the company may issue shares to anyone it chooses by private arrangement.

Can a company reduce its issued capital?

Share capital is the personal property of shareholders rather than the property of the company and so, with some exceptions, it cannot reduce it. The exceptions are:

Where a court order confirms a reduction of capital following a special resolution of the company and the registrar registers the order and a court-approved minute detailing the company's share capital as reduced;

• Where a court order confirms a reduction of capital following a special resolution of the company and the registrar registers the order and a court-approved minute detailing the company's share capital as reduced;
• Where the company redeems its shares in accordance with a redemption contract;
• Where the company's articles allow it to buy its own shares and an ordinary or special resolution (depending on the circumstances) authorises the purchase; or
• A public company whose shares are listed on a recognised investment exchange can either cancel those shares or (subject to rules about maximum holdings) hold them "in treasury" for resale, or transfer to an employees' share scheme, at a later date. In all other cases where the company buys back its own shares it must cancel them and the company's issued share capital reduces. This does not however reduce the company's authorised share capital.

Can a company increase its issued capital?

A company may increase its issued share capital by issuing additional shares. Shares are "issued" when a person is registered as a member in the company's register of members.

'Allotment' is the process by which the company enters into a contract with someone to allot shares and that person acquires an unconditional right to be issued with the shares. Directors allot shares on the company's behalf, but either the company's articles or a resolution of the company passed at a general meeting needs to authorise them to do so

What type of resolution does the company have to pass to give authority to allot shares?

Any public or private company with share capital may give authority by ordinary resolution. Subject to an exception for private companies (noted in the following paragraph) authority must be for a fixed period which must not exceed five years and must set a limit on the amount of shares that the directors can allot under it. The company must deliver a copy of a resolution giving, varying, revoking or renewing an authority to allot shares to Companies House within 15 days of passing it.

A private company with share capital may pass an elective resolution, authorising the directors to allot shares for an indefinite period or for a fixed period longer than five years, though such a resolution must still set a limit on the amount of shares which the directors may allot. The company must deliver a copy of any elective resolution to Companies House within 15 days of passing it. A public company cannot pass an elective resolution.