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Post Info TOPIC: Share Capital
Earnest


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Share Capital
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Hi

A friend of mine recently set up a company and did the company formation without an accountant.  I have just checked the paperwork and have noticed that the shares issued, at start up, was 10000 shares with one paid for.  Can this be amended?  Also my friend has laid out a number of expenses prior to the actual trading (£2000 for a website).  I assume that this would normally be treated as a director's loan but can the initial share capital be used in this instance?  

 

Thanks 



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Shamus


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Hi Earnest,

for the pre trading expenses treat as if purchased on the first day of trade (they are not DLA items).

Note however AIA will not be available for these pre trading purchases.

for the share capital, was that authorised share capital or issued share capital.

If your client has one share and that is the only issued share capital the they own 100% of the issued share capital which equates to 100% of the company.

In the future further shares from the authorised capital may be issued, perhaps to attract investment in which case the one share already owned would be diluted, that is it would not longer represent 100% of the issued share capital.

Personally I see nothing wrong with the company as it is set up with an authorised reserve of 9,999 shares. Like as not these will never actually be issued and 1 share is all that is needed. But, you could always issue all 10,000 if you wanted although the owner would still own only 100% no matter whether they own one share or ten thousand.

kind regards,

Shaun.


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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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