Glossary · UK
What is Share Capital?
The total value of shares a company has issued to its shareholders in exchange for cash or other consideration.
Full Definition
Share capital is the money (or, occasionally, other consideration such as assets or services) that a company has raised by issuing shares to its shareholders in exchange for ownership. "Authorised share capital" (a historical concept, no longer required for companies formed after October 2009) was the maximum a company could issue; "issued" or "allotted" share capital is the actual nominal value of shares that have been allotted to shareholders and recorded at Companies House; and "called-up" share capital is the amount shareholders have actually been asked to pay for those shares, which can be less than the nominal value if shares are only partly paid. Most UK private companies are set up with a very small amount of share capital, often just £1 or £100 divided into ordinary shares of £1 each, because share capital represents the maximum amount a shareholder can be required to contribute if the company becomes insolvent (their liability is "limited" to the unpaid amount on their shares) -- it is not the same as the company's assets, cash reserves, or the value of the business. A company can increase its share capital by allotting new shares (which may dilute existing shareholders unless pre-emption rights apply) or reduce it, subject to safeguards for creditors, through a formal capital reduction process.