Limited Company Formation - Share allocation

[lotusespritforum]

Hi Guys

I went out on a limb back in January and left my job which seems to be the right decision as I'm doing pretty well. I now need to set up a ltd company and wondered what the best way to decide how many shares I want is? I do have 100, 1,000 or 10,000? I will own them all myself but can't find any info on the net about it.

Also, does anyone know any good, reputation company formation agents or am I ok going with one of the millions listed on the web?

TIA

[Eric Mc]

I don't think it's really an isssue for a "one man company". Issuing a largeish number of shares gives you more flexibility if you want to bring in other shareholders and want to be flexible with the percentage of shares held by each individual.

What you should do is make sure that the "Authorised" upper limit of Share Capital is reasonably high but issue only what you need.

Edited by Eric Mc on Wednesday 18th April 13:57

[Ultraviolet]

I don't believe it matters how many shares you issue - it should only effect the share price which isn't really relevant in your case.

Mostly you would issue a large number so they could be sensibly allocated to multiple parties, such as is the case for raising funding. With a small number of shares (at a higher price), it gets difficult to get to a precise number for a particular investment. Also, you would need to issue more (e.g. for an employee share scheme) if sufficient weren't put aside up front, leading to a dilution which won't go down well with the original investors (although provision against this can be defined in the shareholder agreement).

So any number of shares is OK - I have 100 in my ltd company (formed through same day company services).

UV

[lotusespritforum]

Thanks guys.

I was a bit confused as my accountant said to issue 1,000 and allocate 100 to me. I'm going to issue 1,000 and keep 'em all. Seems like the sensible thing to do.

[thewave]

lotusespritforum said:

Thanks guys.

I was a bit confused as my accountant said to issue 1,000 and allocate 100 to me. I'm going to issue 1,000 and keep 'em all. Seems like the sensible thing to do.

Nope! don't do that.

Authorise 1,000 and issue say 100. That way, you can allocate more shares to someone else at a later date if needs be.

Eg. If you wanted to issue some to your other half, or a new director who MAY join you without having to go through the hassle of amending the maaoa.

[lotusespritforum]

Really? Fair play. If it saves me hassle in the long run then I'll do that.

I'm using 'Companies Made Simple', they seem good and I get an EC1 reg office address.

www.westbury.co.uk/company_formation/companiesmadesimple/index.html

[Eric Mc]

Increasing the "Authorised" share capital requires an amendment to the Memo and Arts of the company (as has been said) and this means passing a Special Resolution and having minutes documenting all this and notifying Companies House and paying a filing fee.

However, the new Companies Act has reduced some of this bureaucracy.

[Ultraviolet]

Eric

if you have sufficient authorised share capital to issue additional shares within a class, does this reduce the value of those shares already issued?

thanks!

UV

[lotusespritforum]

All done, thanks ever so much for your advice guys

[thewave]

Ultraviolet said:

Eric

if you have sufficient authorised share capital to issue additional shares within a class, does this reduce the value of those shares already issued?

thanks!

UV

Ultraviolet said:

Eric

if you have sufficient authorised share capital to issue additional shares within a class, does this reduce the value of those shares already issued?

thanks!

UV

VERY simply, if you own 100 shares (i.e. all of them) and you were to issue say 100 to someone else, the value of your shares would half. This is because whereas before your shares were entitled to 100% of the the profit, now they would only be entitled to 50%.

HTH.

[southendpier]

If I can give any advice at all - Don't ever EVER give minority shares to A.N Other in your company. Give them money, perks, bonuses, a slap on the back a cheeky smile - but NEVER GIVE AWAY your company.

If they ever leave you will have a whole heap of fun trying to run your company.

It is your company you started it - 100% - be greedy. Just because your company is small doesn't mean you should give away shares. If your comany was 10,000 times the size would you then GIVE away 5% ????

No.

If somone wants to start a NEW company with you and put some coin in at the same time as you then fine.

[thewave]

southendpier said:

If I can give any advice at all - Don't ever EVER give minority shares to A.N Other in your company. Give them money, perks, bonuses, a slap on the back a cheeky smile - but NEVER GIVE AWAY your company.

If they ever leave you will have a whole heap of fun trying to run your company.

It is your company you started it - 100% - be greedy. Just because your company is small doesn't mean you should give away shares. If your comany was 10,000 times the size would you then GIVE away 5% ????

No.

If somone wants to start a NEW company with you and put some coin in at the same time as you then fine.

From experience?