Directors and shareholders are an important part of any company limited by shares. The two have distinct roles, however, and are not the same.
Broadly speaking, the main difference is that shareholders don’t necessarily work within the business. They have a pivotal role to play, but the day-to-day running of the organisation.
If you want to know about the roles of directors, check out our earlier blog. We’ve also looked at how to pay directors, to help you to decide whether to pay them salaries or dividends.
If you are thinking about becoming a shareholder, we’ll take a deep dive into the role and all you need to know.
What is a shareholder?
Shareholders are also known as members of a company ‘limited by shares’. These include companies that are Limited Liability Partnerships (LLP) or Limited by Guarantee. Companies ‘limited by shares’ are what most limited companies are registered as.
A company shareholder is known as a ‘member’ and can be an individual, a group of people a partnership or even another company, organisation or corporate body. Shareholders must take a minimum of one share in a company.
The number of shares they hold and their overall value depends on how much of the business the shareholder owns. This also influences how much decision-making they have in the business. It also determines how much of the profits they are entitled to as well as the liability for company debts.
Whilst shareholders have the ultimate authority and control of the company, the day-to-day management is down to the directors. Some directors are also shareholders. You can set up a limited company yourself, take shares and appoint yourself as a director.
The role of company shareholder
Shareholders have a number of roles within a company. These include:
- Contributing to company debts.
- Investing money in the business.
- Deciding what powers to grant to the directors.
- Authorising the allotment and transfer of company shares.
- Setting directors’ salaries.
- Receiving a portion of company profits depending on their shareholdings.
- Authorising dividend structures.
- Making decision in exceptional circumstances where directors do not have powers. For example, to change the company’s structure or name.
Can shareholders also be directors?
Shareholders of a company can also be a director. You could own and manage yourself and be the sole shareholder and director. Some people own and manage a company with others and appoint two or more directors. You can also own a company individually and appoint another person as a director.
How many shareholders do I need?
Companies need a minimum of one shareholder to register a private company in the UK. This is done through Companies House. There are no limits to the amount of shareholders there are in a company.
What details you need when appointing shareholders
If you are becoming a shareholder you will need to provide your:
- Full name
- Address
- Share information
- Share class (ordinary, preference redeemable)
- Number of shares
- Value per share
- Three securing question answers for the HMRC website for an online signature.
Corporate shareholders will need to provide:
- Company name
- Director name
- And the same share information above
Is the information public?
Shareholder details are registered at Companies House and some details are available to the public to view on the company register. This includes:
- Name
- Address
- Types of shares held
- How many shares they hold
- The nominal value and currency of their shares
- Amount paid or due to be paid on each share
If a shareholder is a ‘person with significant control’ They will also have to provide additional information for the public register. This includes:
- Month and year of birth
- Nationality
- Country of residence
The information remains in the public domain even when an individual or company is no longer a shareholder.
Can companies appoint shareholders at any time?
Shareholders can be appointed at any time, not just at the start. In fact, the first shareholders are known as ‘subscribers’.
The details of new shareholders or directors should be made at Companies House. Shares can be added or transferred and this should be also carried out through Companies House. You will need file a CS01 – or Confirmation Statement – when making these changes. If you need more information, check out the government’s website about shareholders.
How do I form my company?
If you need help setting up your new limited company or are a sole trader about to become incorporated, we can help. We can help guide you through the process and give you all the information about the roles of shareholders and directors.
Contact our team today or call 0191 603 1760 for a free initial consultation.
