Shareholders in a company make important decisions about key appointments and factors such as selling or keeping the business.
Limited companies in the UK need to be formed with a minimum of one share. Most of these businesses will issue one share per shareholder, unless companies need a more complex system.
Who can become a shareholder?
Anyone who purchases shares becomes a shareholder.
Individuals can research the company to assess how financially stable it is. They can then find out the price of the stock easily, online or through a brokerage firm. Once they are confident enough about the company’s viability in the marketplace, they can purchase a minimum of one share. Most shareholders will choose to invest in more.
Once the person/company is a shareholder, they can attend meetings. There are different types for different purposes. The AGM occurs once a year, whilst the ‘special meeting’ will deal with an important matter that comes to light. The ‘combined meeting’ deals with the annual business and important issues.
Issues that are dealt with at shareholders meetings can make or break a company. Shareholders can decide to sell the business or launch a new product or service. They might choose to re-invest assets in a new area of business.
All shareholders have to be notified about special meetings to give them the opportunity to attend. Proxy voting takes place when a shareholder authorises another to vote on their behalf at the meeting because they are unable to attend. Obviously they need to trust that shareholder to vote as they ask them to!
Shares in the business mean ownership. A company or an individual becomes an owner of the company. They are entitled to reap the rewards in the form of a share of any profits made.
- If a business releases shares, this is known as share capital. This capital equals the share value.
- Most companies offer ordinary shares, which are standard and have no restrictions. One share usually equals one vote.
- Other types of shares offered by a company include redeemable, cumulative and preference shares.
- Ordinary shares are generally the last type to be paid out if the company happens to be in trouble.
- Each type of share has features which are known as ‘prescribed particulars’. These features include how shares can be redeemed, dividend rights and voting rights.
What price should shares be set at?
In the UK, limited companies tend to register shares at £1 each. This is known as the share’s nominal value and is equal to the amount the shareholder will pay. This value may change over time, depending on the company’s performance.
The value and number of shares is recorded in the capital statement at Companies House.
A public company sells shares through brokers. In unlimited or private companies, shares can be transferred between the seller and buyer with a private agreement. Each company has different rules about how the transferral takes place and the director needs to approve this.