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Statement of Capital

 

General Information

The Statement of Capital was introduced on 1st October 2009 as part of the Companies Act 2006 and effectively replacing the previous regime where authorised shares existed.

For every new company formation since the above date a Statement of Capital is required. Whilst not being an extensive section of the online or manual incorporation procedure, it is still more detailed than its predecessor.

The information submitted in the Statement of Capital is centred solely on the number of shares (and where relevant, their various classes) actually issued. The concept of having a “bank of shares” available to be issued as previously depicted in the authorised share capital no longer exists.

Under the new 2006 Companies Act a person forming a company does not have to state at the time of incorporation or any future date the maximum number of shares which can be issued. The amount is deeded to be unlimited and can be increased at any time without having a predetermined ceiling (which essentially was the authorised share capital limit).

Completing the Statement of Capital

The main areas involved when completing of the Statement of Capital as previously mentioned is predisposed to the shares actually in issue and the elements pertaining to them.

Currency – Companies House can form a company provided their share capital contains a recognised currency. Whilst the most popular choice is Great British Pounds (GBP), the Euro, Yen and Dollar are also common selections particularly where the majority of trading activities will be confined to that respective country.

Share Class – Whilst the majority of UK companies limited by shares are registered with a single class of shares, a description is still required for that (and any additional) issues of equity.

The default narrative in this section is usually “Ordinary £1” where only one class is issued and “Ordinary £1 Class A”, “Ordinary £1 Class B” and so on where multiple classes of shares are to be distributed.

The £1 highlighted in the above examples is of course only relevant where the nominal value of the shares in the Statement of Capital is in fact selected as that amount. Other denominations such as 10p or penny shares are also quite commonplace.

Value Per Share – The third element in completing the Statement of Capital lies with choosing a nominal value of each category of share being issued. As sated above, most values are set at a single pound although it is possible to change this should the person wish.

The initial value selected can of course be changed at a later date either by consolidating or dividing the nominal amount in to a small number of higher value shares or a small number of lower denominated units.

Number of Shares to be Issued – The Statement of Capital now requests details of the total number of shares to be issued. In the majority of situations where there is a single director/shareholder company set-up, the amount will be one.

Additional shareholders would certainly warrant an increase in this number as a single share unit can not be spilt in to fractions. Each shareholder must be allocated at least a single whole unit.

Amount Paid/Due per Share – On a company incorporation the value for the amount paid/due per share is usually equal to the nominal value of stated in the previous Value Per Share section.

Both the nominal value and the number of units allotted to a particular person or company shareholder is used to determine their liability towards the company. Thus a company which is issued 100 £1 shares is deeded to have accepted an obligation to pay £100 x 1 to the company for this allocation.

Amount Unpaid per Share – When the company is first registered all amounts due for the issued shares are unpaid. This part of the Statement of Capital is not concerned with this but rather is singularly relevant only where distributed shares will not be paid for at some future time.

Thus the proceeding section generally covers situations where consideration will be received at a later date for the distribution of shares which occurs at the time incorporation.

Voting Rights – The section requires the use of natural English to describe the specific rights being attached to the class of shares. Where a single body of shares will exist the narrative will state that each unit will have equal voting rights and claims to declared dividends as each other.

In essence all shares in that class will be homogeneous and control exercised via voting and dividends received will be determined solely by the proportion each person or company shareholder owns. Put simply, a shareholder with 60% of the total shares would be able to exercise 60% of influence and be the recipient of 60% of any profit distributions made by the company.

The situation can become more complicated where there are multiple classes of shares in issue. For each type of share the person registering the company must determine what rights each class are to enjoy and of course who to allocate them to.

Examples

Thus there are unlimited combinations and permutations which could be implemented. Some examples are:
Statement of Capital - Scenario One:
Class of Share Voting Rights Rights to Dividends Rights on Winding Up
Ordinary £1 Class A One share = one vote Equal rights to dividends Equal rights on winding up
Ordinary £1 Class B No voting rights Equal rights to dividends Equal rights on winding up
Statement of Capital - Scenario Two:
Class of Share Voting Rights Rights to Dividends Rights on Winding Up
Ordinary £1 Class A One share = Eight votes No rights to dividends Equal rights on winding up
Ordinary £1 Class B One share = one vote Equal rights to dividends Equal rights on winding up

Companies House will seek to validate the information contained in the Statement of Capital for each company registration request it received. The Complete Formations online incorporation system provides it own integrity checks in order to minimise the time wasted in submitting an application. Any errors in the calculations are brought to the attention of the person immediately and can thereby be corrected.

Whilst the Statement of Capital is a significant departure from the previous authorised vs. issued shares structure, its introduction is widely seen as being of substantial benefit to UK companies who now enjoy unrestricted abilities to increase the number of shares they have in existence. Any rise in the number units in issue can now be implemented without having to navigate a predetermined and perhaps archaic restriction.
 

A Statement of Capital
Statement of Capital
 
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