Share capital is a concept that founders encounter when registering a limited company, but it is one that is often set up without much thought — many founders simply adopt whatever defaults a formation agent suggests. Understanding what share capital actually means, and how the decisions made at formation affect ownership structure and future flexibility, is worth spending time on before you register.
Share capital is the total value of shares issued by a company to its shareholders. When a company is formed, founders decide how many shares to issue and at what nominal value. The allocation determines each shareholder's ownership percentage and, depending on the articles, their voting rights and entitlement to dividends. The nominal value does not need to reflect the commercial value of the business — it is a legal construct rather than a statement of the company's worth.
Share capital decisions affect how ownership is divided, how future investors can be brought in, and what happens if a co-founder leaves. Starting with a round number of shares at a low nominal value gives the company flexibility to allocate further shares later without administrative complexity. Our guide to share capital and company structure explains the key decisions UK founders need to make at formation.