Forming a company – what is a statement of capital?

A statement of capital is an official document that provides details of a company’s issued shares and their status as of 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 is filed.

The statement is designed to provide a snapshot of the types of shares issued, the rights associated with the different share types, and the denomination and currency of those shares.

A statement of capital ensures transparency for shareholders, potential investors, creditors, and relevant authorities, forming a key component of a company’s statutory disclosure obligations.

When must you complete a statement of capital?

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 repurchased by the company.

This also applies when share capital is reorganised – for example, during a share split or consolidation. In each of these cases, a fresh statement of capital must be filed to reflect the updated share structure.

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 when the company is reducing its share capital, typically 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 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 are set up with only one class of shares, namely, ordinary shares.

In this instance, the statement will state that each share entitles the holder to 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 becomes more complex if multiple share classes are issued, requiring the type and number of each to be included in the statement.

If you plan to offer different share classes to attract outside investors at some time in the future, it’s essential to define the terms clearly in both the statement of capital and your Articles of Association.

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.

For example, in a typical one or two-man band limited company, the nominal share value will usually be £1, although this can vary.

Other classes, such as preference shares, can have different nominal values, from 1 pence to £100.

It is worth noting that the nominal value is not necessarily the same as the market value of the share.

The nominal amount is purely a notional figure for accounting purposes and can influence voting rights, dividend entitlement, or share buyback price if structured accordingly.

Share classes

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

Popular share classes include:

• A, B, C, etc. Ordinary: identical to Ordinary but used for internal differentiation.

• Preference Shares: are entitled to fixed dividends before others.

• Redeemable Shares: can be repurchased by the company under agreed terms.

Each of these share classes must be carefully explained in your statement to avoid future disputes.

Paid and unpaid shares, currency

The statement must clarify whether shares have been issued to a shareholder but are still outstanding and unpaid.

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.

Unpaid or partly paid shares represent a liability for the shareholder. In the event of winding up, the company can require the unpaid amount to be paid in full. This is a crucial consideration for both the company’s founders and investors.

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

If you don’t update your statement of capital promptly, this may result in Companies House rejecting your filings or issuing penalties.

It may also delay essential business activities such as raising finance, transferring shares, or selling the company.

Annual confirmation statement

The annual confirmation statement provides Companies House with details of your limited company or limited liability partnership that are held on the public record.

The confirmation statement must be filed no more than 14 days after the anniversary of the company’s 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.

PSC information includes individuals or entities that:

• Hold more than 25% of shares or voting rights

• Have the right to appoint or remove a majority of the board

• Otherwise exercise significant influence or control

Failure to report accurate PSC details is a criminal offence and may result in fines or prosecution.

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?