Enthusiasm may have got the better of you when you formed your limited company resulting in an enormously silly amount of share capital being set up and allocated to you.
Statement of Share Capital
When you form a company you provide a statement of share capital which details the shares that have been issued to, what is known as, a subscriber or shareholder.
The statement of share capital can be updated if and when new shares are issued; so there’s no need to have an enormous number of shares on incorporation of the company. In fact you only need to have one share to form a company.
Given this there’s little point in forming a company with much more than the minimum share capital e.g. one share of £1 each, 10 shares of £1 each or 100 shares of £1 each.
Unfortunately some seem to be unaware of this and have share capital of thousands of pounds.
The problem is the share capital has to be paid for. In reality this means that the amount taken in shares needs to be paid into the company.
So if, for example, you set up a company with 100,000 shares of £1 each you will need to pay the £100,000 into the company or record it as an unpaid share capital debtor i.e. you owe the company £100,000. This is altogether something to avoid.
How to unravel silly shareholdings
Don’t despair as there is a very simple way to unravel this and get your company’s shareholding back on track.
There is a formal process to reduce the share capital which requires a form and a declaration to be filed at Companies House.
It’s a simple and easy to follow process.
Reducing the shareholding process
To reduce the shareholding you need to complete a form SH19.
The form SH19 is easy to complete:
- Enter the company number at the top
- Enter the name of the company
- In section 2 put the details of the shares that you want the company to have now
- In section 3, Prescribed particulars the usual response would be something like “One share equals one vote each having rights to dividends so long as there are no rights attached to shares on winding up etc or redemption rights.”
- Sign in box four and enter your details
Once completed the form, along with a £10 filing fee and a Statement of Solvency (see below), needs to be sent to The Registrar of Companies, Companies House, Crown Way, Cardiff, Wales, CF14 3UZ if your company is registered in England or Wales. For a company registered in Scotland or Northern Ireland the relevant address can be found on the GOV.uk website – click here.
Statement of Solvency
Along with the SH19 and the £10 filing you will need to provide Companies House with a Statement of Solvency which looks something like this:
Name of Limited Company
Address and Postcode of Company Registered Office
Registered number [company registration number]
Directors Statement of solvency
As at the date of this statement, we confirm that the company can meet all of its debts as they fall due and we expect that it will continue to be able to pay or settle its debts on time during the next 12 months. The company does not expect to cease trading within the next year.
Having considered the Directors solvency statement prepared today, the shareholders agreed that the company’s issued share capital be reduced from £[current amount of shareholding] to £[sensible amount of shareholding].
Signed – [your name], Director