There is no legal minimum or maximum: each share must have a fixed nominal value, and the founders choose both how many shares to issue and what each is worth on paper. A sensible starting point is enough shares, at a low nominal value, that the stakes you expect to give later (an investor’s 20%, an employee’s 1%, a spouse’s share) work out as whole numbers, while keeping the total nominal capital small. The numbers can be changed later, but getting them right at incorporation saves filings and awkward fractions.

What does the law actually require?

Very little. Section 542 of the Companies Act 2006 says shares in a limited company must each have a fixed nominal value, and an allotment of a share without one is void. Shares can be denominated in any currency, and different classes can be in different currencies. GOV.UK confirms that a company limited by shares needs at least one shareholder, that there is no maximum number of shareholders and that the price of an individual share can be any value.

On incorporation, section 10 requires a statement of capital and initial shareholdings showing the total number of shares taken by the subscribers, their aggregate nominal value, any amount unpaid and, for each class, the prescribed particulars of the rights attached. That is the only point at which the law asks the question this page is about, and it leaves the answer to you. The wider formation process is covered in how to incorporate a company.

Why does the number of shares make a difference if only percentages count?

Because almost everything is done per share. Under section 284, on a written resolution or a poll every member has one vote for each share unless the articles say otherwise. Under article 30(4) of the model articles, dividends are paid by reference to each shareholder’s holding unless the resolution or the terms of issue say otherwise. Transfers, options and gifts are all made in whole shares.

A company formed with one share of £1 cannot give anyone 10% without first issuing more shares or subdividing the one it has. A company with 100 shares can move in steps of 1%, which is fine for founders but awkward for employee options or for an investor whose stake is negotiated to a decimal place. A company with 1,000 or 10,000 shares can deal with all of these cleanly.

Illustration only: starting structure Total nominal capital Smallest stake without new shares
1 share of £1 £1 100%
100 shares of £1 £100 1%
1,000 shares of £0.01 £10 0.1%
10,000 shares of £0.01 £100 0.01%

What nominal value should the shares have?

Nominal value is a floor and a liability, not a valuation. Three rules drive the choice:

  • Liability. Under section 3(2), members of a company limited by shares are liable only for any amount unpaid on their shares. GOV.UK notes that shareholders must pay for their shares in full if the company has to shut down, and suggests a low share value to keep that liability reasonable. Issuing 1,000 shares of £100 each unpaid leaves the founders owing £100,000 if the company fails.
  • No discount. Section 580 prohibits allotting shares at a discount to nominal value. A low nominal value keeps future issues, including issues to employees at a modest price, above that floor.
  • Premium. Anything paid above nominal value goes to the share premium account under section 610, which can be used for issue costs and bonus issues but is otherwise treated like share capital. See share premium account.

Nominal value also decides percentages for several legal tests. For people with significant control, holding “more than 25% of the shares” means shares with a nominal value exceeding 25% of the issued share capital (paragraph 13 of Schedule 1A). HMRC’s Capital Gains Manual at CG64050 says that for Business Asset Disposal Relief it is the nominal value of ordinary share capital, not the number of shares or the amount subscribed, that counts. If you later create a second class with a different nominal value, the percentages by number and by nominal value will no longer match, so keep nominal values the same across classes unless there is a reason not to.

How should future investors shape the decision?

An investor normally subscribes for new shares at a price per share made up of nominal value plus premium. The more shares in issue, the more precisely the price and percentage can be set. Before new shares go to an outsider, section 561 requires them to be offered first to existing ordinary shareholders in proportion to their holdings, unless pre emption rights have been excluded or disapplied.

The directors also need authority to allot. Section 550 lets the directors of a private company with only one class of shares allot more of that class unless the articles prohibit it. Once there is a second class, authority under section 551 is needed, stating a maximum number of shares and an expiry date no more than five years ahead. Each allotment must be reported on a return of allotment with a statement of capital within one month under section 555 (form SH01).

What about shares or options for employees?

Employee stakes are usually small, so granularity is most important here. Options under the Enterprise Management Incentives scheme must be over shares that form part of the ordinary share capital, are fully paid up and are not redeemable (paragraph 35 of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003). With only 100 shares in issue, a 0.5% grant is impossible without restructuring.

Founders should also think about their own reliefs. For shares not acquired under EMI, Business Asset Disposal Relief requires the company to be the seller’s personal company: at least 5% of the ordinary share capital and 5% of the voting rights, plus 5% of profits and assets or of sale proceeds (section 169S(3) of the Taxation of Chargeable Gains Act 1992). GOV.UK explains that EMI shares follow a separate route. Large future issues can dilute a founder below 5%, which is a reason to plan the share count and the dilution together. The wider options are covered in giving shares to employees.

How do family shareholders fit in?

Giving a spouse or adult child shares at formation is common, but the shares should carry real rights. HMRC’s Trusts, Settlements and Estates Manual at TSEM4205 gives the example of B shares with no votes and no rights to assets on a winding up, issued to the founders’ wives: the dividends on them are treated as the founders’ income because the shares are wholly or substantially a right to income. By contrast, an outright gift of ordinary shares carrying capital rights was outside the settlements rules in Jones v Garnett.

If you want flexibility to pay different dividends to different family members, the shares need to be in separate classes with articles that allow it; see alphabet shares. If family members will not have votes, see non voting shares. Remember that a shareholder with more than 25% of the shares or votes is a person with significant control and must be reported.

Can the number be changed later?

Yes. Section 618 lets a limited company subdivide its shares into shares of smaller nominal value, or consolidate them into larger ones, once the members have passed a resolution authorising it; the articles can restrict this. The ratio of paid to unpaid on each new share must stay the same, and notice with a statement of capital must reach Companies House within one month under section 619 (form SH02). Subdivision is cheap, but it is still a resolution, a filing and new certificates, so it is better to start with a workable number. See subdivision and consolidation of shares.

What might this look like for two founders?

Illustration only. Asha and Ben form a company and expect to bring in an investor for about 20% within two years and to grant EMI options to early staff.

  1. They issue 10,000 ordinary shares of £0.01 each, 5,000 each, paying £50 apiece. Total nominal capital is £100.
  2. An investor later subscribes for 2,500 new shares. The company then has 12,500 shares and the investor holds exactly 20%. If the price is £40 a share, £25 of the £100,000 is nominal value and the rest goes to share premium.
  3. An option over 1% of the enlarged company is 125 shares, a whole number.
  4. Asha and Ben each hold 40% after the investment, comfortably above the 5% personal company test.

Had they issued one £1 share each, every one of these steps would have needed a subdivision or a bonus issue first.

What are the common mistakes?

  • Issuing one or two shares in total, which blocks any small transfer or option without restructuring.
  • Choosing a high nominal value and leaving it unpaid, creating a real liability under section 3(2).
  • Creating a second class with a different nominal value and then measuring percentages by number of shares, when the significant control and relief tests use nominal value.
  • Forgetting that section 550 stops working once there is more than one class, so later allotments go ahead without section 551 authority.
  • Giving family members shares with no capital rights, which brings the settlements rules into play.
  • Not filing form SH01 within one month of each allotment.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.