How do shares work in a limited company?

Last updated · General guidance, not legal or tax advice

Shares are units of ownership in a limited company. Each share has a nominal value (for example £1) and carries rights — usually to vote, receive dividends when declared and share in any surplus if the company is wound up. What percentage of the company you own depends on how many of the issued shares you hold, not on their nominal value.

Most small companies start with one class of ordinary shares. More complex structures are possible, but they bring legal and tax consequences, so get advice before creating them.

How many shares should I issue, and at what value?

There is no single right answer. Many companies start with 100 ordinary shares of £1 each, because 100 makes percentages easy: 60 shares means 60%. Shareholders normally have to pay the nominal value — so £100 in total in that example — either straight away or later if the shares are left unpaid.

Nominal value is not the same as what the company is worth. As the business grows, shares can be worth much more than their nominal value.

What rights do ordinary shares carry?

  • Voting — usually one vote per share on shareholder resolutions
  • Dividends — an equal share per share of any dividend declared
  • Capital — an equal share per share of any surplus on a winding up

See what a shareholder is for how voting thresholds work.

What are share classes?

A company can create different classes of share with different rights. Common examples:

  • Non-voting shares — dividend and capital rights but no vote
  • Preference shares — priority for dividends or capital, sometimes at a fixed rate
  • Alphabet shares (A, B, C) — separate classes so dividends can be declared on one class but not another

Share classes can be useful, but they must be set up properly in the articles and statement of capital, and HMRC applies anti-avoidance rules to some arrangements — for example, dividends to family members. For anything beyond ordinary shares, take legal and tax advice first; In Front Accounting can advise on the tax side.

How are new shares issued?

Issuing (allotting) new shares usually needs the directors to have authority under the articles or from the shareholders, and existing shareholders may have pre-emption rights to be offered new shares first. After allotting, the company files a return of allotment with Companies House, including an updated statement of capital, and updates its register of members.

How are shares transferred?

An existing shareholder can transfer shares to someone else, usually with a stock transfer form. The company updates its register of members, and the change is shown on the next confirmation statement. Your articles may restrict transfers, and Stamp Duty can apply where shares are bought.

Does changing shareholdings affect the PSC register?

Often. If an issue or transfer takes someone over or under 25% of the shares or votes, the PSC register and Companies House must be updated. See who counts as a PSC.

Practical tips for founders

  • Keep it simple at incorporation — one class of ordinary shares suits most new companies.
  • Think about future co-founders or investors before fixing the split.
  • Put a shareholders' agreement in place when there is more than one owner.
  • Keep the register of members accurate and file changes on time.

In short

Shares are units of ownership in a limited company. Each share has a nominal value, such as £1, and carries rights — usually to vote, receive dividends when declared and share in any surplus on a winding up. Your percentage of ownership depends on how many of the issued shares you hold. Many small companies issue 100 ordinary shares of £1 to keep percentages simple. Companies can create other classes, such as non-voting, preference or alphabet shares, but these need careful drafting, and some arrangements are subject to tax anti-avoidance rules, so take advice. New shares are allotted and reported to Companies House; transfers are recorded in the register of members and shown on the confirmation statement.

Frequently asked questions

Do I have to pay for my shares?

Shareholders are normally liable to pay the nominal value of their shares. They can pay at the outset or leave the shares unpaid, in which case the amount is owed to the company.

Can I change my share structure later?

Yes, by issuing new shares, transferring shares, or creating new classes with proper resolutions and filings.

Sources and official guidance

This guide is general information about UK rules as at 3 October 2026. It is not legal, tax or financial advice.