{"id":190250,"date":"2024-09-07T12:26:43","date_gmt":"2024-09-07T11:26:43","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=190250"},"modified":"2024-11-06T01:08:32","modified_gmt":"2024-11-06T01:08:32","slug":"ordinary-share-capital","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/startups\/ordinary-share-capital\/","title":{"rendered":"What is Ordinary Share Capital?"},"content":{"rendered":"\n

Ordinary share capital means the total amount of shares a company has issued at any time. This includes all classes of shares that a company has created and issued except for \u2018fixed rate\u2019 shares, being share capital, the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company\u2019s profits. A company’s total ordinary share capital can change depending on whether they issue more shares, buy them back from shareholders or undertake a reduction of capital. When considering the value of the ordinary share capital of a company, it is essential to note that the value is calculated from the nominal value for each share. This article explains ordinary share capital, its impact on tax reliefs, regulatory disclosures, and how companies can issue or buy back shares.<\/p>\n\n\n\n

Why Is Ordinary Share Capital Important?<\/h2>\n\n\n\n

Ordinary share capital plays a significant role as the law uses it as a benchmark when assessing a company\u2019s tax position and determining eligibility for various tax reliefs. Shareholders\u2019 holdings of a percentage of the share capital can affect their eligibility for tax reliefs like entrepreneurs’ relief. It can also trigger regulatory transparency requirements, such as the need for Persons with Significant Control (PSC) disclosures. <\/p>\n\n\n\n

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For example, when a shareholder holds more than 25% of a company’s ordinary share capital, their details must be included in the PSC list at Companies House.<\/p>\n<\/div>\n\n\n\n

Ordinary share capital represents the equity shareholders invest in the business, helping companies and regulators distinguish between equity-raised and debt finance.<\/p>\n\n\n

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What Is Included?<\/h2>\n\n\n\n

Ordinary share capital comprises all shares issued in the company at any time. This can include different class shares<\/a>, such as employee and partly paid shares. However, with partly paid shares, only the shareholders’ value of shares that have been \u2018called\u2019 (paid in) is included in the share capital.<\/p>\n\n\n\n

Notably, \u2018fixed rate\u2019 shares are not included in a company\u2019s ordinary share capital. If the company becomes insolvent and is wound up, fixed-rate shares include the following:<\/p>\n\n\n\n