Forming a company – what is a statement of capital?

A statement of capital is an official form which gives details of a company’s issued shares and their status at a specific date. It’s part of the documentation that has to be completed during the company incorporation process and also on the date an annual confirmation statement – previously known as the annual return (see below) – is filed.

The statement is designed to be a snapshot of the types of shares issued and also the rights that come with the different share types and the denomination and currency of those shares.

When must you complete a statement of capital?

First introduced in October 2009 when the Companies Act 2006 was fully adopted, all limited by shares companies are required by law to complete a Statement of Capital and Initial Shareholdings on Form 1N01 during the company formation process, and whenever new shares in the company are issued or bought back by the company.

You can view all the relevant fields from Form IN01 here (the paper equivalent of the online Companies House incorporation process).

A statement must also be completed when a company is converting from unlimited to limited (using Form SH19) and if the company is reducing its share capital, usually when accompanying a solvency statement.

What to include in a statement of capital

This document must include the following details:

• The total number of issued company shares.
• The total nominal value of the company shares.
• The share class or, in the case of different types, the share classes. Usually, these will be ordinary shares, if not, a breakdown of each share type and the aggregate nominal value of the shares in each class is required.
• Details of amounts paid to be paid on each share
• Any prescribed rights that are attached to each class of share.
• Confirm in which currency the share value is held.

Total number of issued company shares

Most limited by shares companies, including contractor limited companies, are set up with one class of share only, namely ordinary shares. In this instance, the statement will state that each share provides equal claims to any dividends and equal voting rights. In other words, each shareholder’s dividends and voting rights are determined by the number of shares they hold. The situation gets more complex if multiple share classes are issued and requires the type and number of each to be included in the statement.

Aggregate nominal value

This is a calculation of the value of the shares in each class. The total number of shares in each class is multiplied by its nominal share value; in a contractor limited company, for example, the nominal share value will usually be £1, although this can vary. Other classes, such as preference shares, can have different nominal values, from 1pence to £100.

Share classes

Companies with different share classes are required to give full details, including voting and dividend rights, redemption details, and any other relevant information about the rights, conditions and responsibilities placed on the holders of such shares.

Paid and unpaid shares, currency

The statement must clarify if shares have been issued to a shareholder but are still to be paid for. Most UK-based limited companies have shares in pounds, but if shares are held in a different currency this should be declared in the statement.

Updating your statement of capital

You have to file an updated statement of capital with Companies House each time anything related to your company’s shares changes.

This includes if the number of shares allotted changes, the nominal value of shares changes and/or the value of the allotted shares changes. You should also update the statement if shares that were previously unpaid become paid.

Annual confirmation statement

As mentioned above, the confirmation statement has replaced the annual return. Essentially it performs the same function and provides Companies House with details of your limited company or limited liability partnership that are held on the public record.

Designed to be simpler to complete, the confirmation statement has to be filed no more than 14 days after the anniversary of the company registration and every year thereafter on the anniversary of the previous return date.

One significant addition included in the confirmation statement is the requirement to provide information about people with significant control (PSC) over the business.

Further Reading on LCH

For more information, try what is share capital, and what types of share can you issue?, and what are different share classes used for?