Definition
Share capital is the amount shareholders have paid, or agreed to pay, a company for their shares, recorded at the shares’ nominal (face) value. Many small companies have share capital of between £1 and £100, for example 100 ordinary shares of £1 each. It appears under capital and reserves on the balance sheet, and Companies House holds a statement of capital showing the shares issued.
Nominal value and share premium
If shares are issued for more than their nominal value, only the nominal amount counts as share capital. The extra goes to a separate share premium account. So 100 shares of £1 issued for £10 each give £100 of share capital and £900 of share premium.
Share capital is not profit
Money paid for shares belongs to the company but is not income, and it cannot be paid out as a dividend. Dividends can only come from profits available for distribution.
Reporting changes to Companies House
New shares allotted after incorporation are reported on form SH01 (return of allotment of shares). The confirmation statement can also update the statement of capital and shareholder details. For where share capital sits alongside retained profits, see capital and reserves on the balance sheet.
Related questions
- How do I read my company's balance sheet? Work down from assets to net assets, then check the total against capital and reserves, which includes share capital.
- What if the shareholders never paid for their shares? The unpaid amount appears on the balance sheet as called up share capital not paid.
Related terms
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Called up share capital not paid
Called up share capital not paid is a balance sheet line showing share capital that shareholders owe the company but have not yet paid.
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Retained earnings
Retained earnings are the profits a company has built up since it started, after Corporation Tax, less all the dividends it has paid.
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Balance sheet
A balance sheet is a snapshot of a company's finances on the last day of its financial year.
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Confirmation statement
A confirmation statement (form CS01) is the filing in which a company confirms that the information Companies House holds about it is correct, such as its officers…
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