All private Limited companies must have at least one appointed director who will also be the authorising person. There must also be at least one share holder and all private limited companies are legally bound to issuing at least one share. From a legal perspective, there are no limits to the number of directors that a private limited company can have. There is also no limit to the number of shares that a company has or decides to issue. Information about the maximum limit of shares that are issued will be detailed in the company’s article of Association. Generally there are no set guidelines for issuing shares. Such decisions regarding how many shares are issued will be down to the shareholders who have formed the new company.
When does a private limited company normally issue shares?
In most cases new shares will be issued to generate funds for the business. Alternatively shares can be issued to help achieve various other business goals. Here are some examples of when a company will issue shares.
- When a new company is incorporated, it will normally issue shares which are then added to any capital borrowed. This will help private limited companies to start trading.
- Shares can be issued at a later date to also help fund new projects or business development.
- Shares can also be issued to cover money and capital that the company has borrowed
- Private limited companies could issue shares to business owners of a company it wants to purchase. Shares can be can be issued as payment or to raise cash to help pay for the business.
- Many private limited companies now issue shares to new or existing employees
- Some private limited companies may want to buy shares in another company. Shares in its own company can be issued as payment.
- Private limited companies may also make a bonus issue of shares that may be given to existing shareholders from the company’s profits. Generally this can be an alternative to paying them in cash dividends. New shares can be issued instead.
There is a lot of flexibility when it comes to issuing shares. The decisions will normally rest with the company shareholders who have founded the company. Many private limited companies will issue shares for investment into the company. For some new companies it can be common practice to issue one share but for a lot of companies, it can make sense to issue 100 shares as it can be much easier to determine the percentage of ownership in a company.
When forming a new private limited company, considering the future plans for the business can help to determine how many shares to issue and to whom. Shares can be issued at any time in the future. For more information on company formation and the issuing of shares, you can contact us at Company Formations 247. There are also professional consultants who can offer further advice. If you are forming the business yourself or with a partner, then it can be a simple decision. Having several investors might require issuing shares to all investors so it is wise to give careful consideration to the issuing of shares when planning to form your new company. You can find more on issuing shares by clicking here.
