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Be Careful When Issuing Company Shares - #AskAMS

What kinds of issues should business owners be aware of when issuing company shares? We asked financial experts AMS Accountancy.

I have seen small Companies with a share capital of £40,000 upwards, which can create a debt owed to the Company for unpaid shares, and effectively removes virtually all the benefits of limited liability.

Example: With a share capital of £100, if the Company goes into liquidation, the shareholders can lose the value of their shares. This means they might have to pay £100 personally to the creditors. With share capital of £40,000, the risk becomes £40,000!

In order to cancel shares issued in error, the Directors must:

Draft a Special Resolution cancelling the shares which must be approved by the shareholders
Draw up a statement of solvency confirming that the Company can pay its debts and will be able to do so for the following 12 months
Confirm that the solvency statement was made not more than 15 days before the resolution was passed – and provided to the shareholders.
Complete a form SH19 and send to Companies House – with the other three documents.

Then, the shares will be cancelled and monies can be repaid to the appropriate shareholders – or the value of the cancelled shares can be used to clear/reduce the amounts owed for unpaid share capital – which brings the share capital down to a more practical, and safer, level.

AMS Accountancy Ltd

AMS Accountants in Swindon provide a complete accountancy service for small businesses in Wiltshire and a monthly accountancy service for contractors throughout the UK.

Delta 606, Welton Road, Swindon, SN5 7XF

Website Email 01793 818400

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Be Careful When Issuing Company Shares - #AskAMS

What kinds of issues should business owners be aware of when issuing company shares? We asked financial experts AMS Accountancy.

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