How Many Shares Do I Need to Issue in My Company?
Normally, one important question asked during company formation – How many shares do I need to issue while setting up my limited company? A minimum of one share must be issued during the company formation process. If registering a company with more than one shareholder, this should be at least one share per member/shareholder. Further, there is no restriction to the number of shares a company can issue during or after incorporation. However, these number of shares can be limited by adding voluntary clause in the articles of association.
Should I issue one share during formation?
Companies with one shareholder normally issues just one share, which means owning 100% ownership of company. However, this can be complicated to bring in outside investors in future as it is impossible to split one share. Best practice is to issue more shares during company registration i.e., ten, fifty, hundred etc. This gives flexibility of transferring shares when needed.
Recommendation on number of shares
There are no rules for deciding the number of shares, it can vary company to company. Its common to issue 100 shares since each share shows 1% of the company. It is the easiest way to work out how much of the company is owned by each shareholder and how much control they have in the company. More capital can be generated by selling smaller portion of ownership to several individuals, rather selling large number of shares to only few people.
When the shares needed to be paid for?
It is not mandatory to pay for the shares at the time of incorporation or transfer unless the company goes into bankruptcy or is wound up. If shares are issued to raise capital, such shares are paid for when they are granted. Payments for shares are recorded in the company’s financial records. The mode of payment can be non-cash and / or cash payments. Where shares are not paid at the time a company is wound up, then the shareholder should pay nominal value of shares because shareholders are only accountable up to the nominal value of shares.