Company Subscribers: All You Need To Know About Subscribers

When you come across company formation articles, you'll find the words shareholders, directors and persons with significant control (PSC).

But you might also come across the term subscribers. In this article, we'll talk about everything you need to know about company subscribers. Let's get started

Who is a Company Subscriber?

A company subscriber is one of the first shareholders of a company. A subscriber is the shareholder of a company during company formation. They are called subscribers because they subscribe to the company's article of association and memorandum at creation. Only shareholders that are present and names included in the company formation subscribers list are called company subscribers.

The term subscriber is sometimes used for company shareholders. But we have to take note there's a difference between the two terms.

Who is a Subscriber?

As stated by the Companies Act of 2006, a subscriber is referred to so because they subscribe their names to the articles of association and memorandum of the company at formation.

Also, a subscriber can be a guarantor of a company during the process of formation. The difference between a shareholder and a guarantor is the difference between the company type.

If the company is limited by shares, the person is called a shareholder but if the company is limited by guarantee, the person is referred to as a guarantor.

They all serve the same purpose at the company's formation and are both called subscribers of the company they partake in.

A director during the formation of a company is also called a subscriber since the director's name(s) are also included in the Article of Association. When forming a company, the subscribers are to

• Provide their name and address.
• State their intentions towards forming a limited liability company.
• Write out an agreement to become a member of the company.
• Write out an agreement to take at least one share in the company (this is only for companies limited by shares)

Unlike companies limited with shares that issue shares to their members, companies limited by guarantee do not issue shares.

This information about the shareholders or guarantors is out in the company's official document and the Article of Association and they are referred to as subscribers.

Subscribers of Companies Limited by Shares

In companies limited by shares, each shareholder present during the formation of the company officially becomes a subscriber. Their names are included in the company's article of association and they are officially the founding members of the company.

The shares which the shareholders take during the formation of the company determine the following.

• How much of the company they own
• The shareholder's entitlement to the company's profits.
• The power they possess in the company during decision-making.
• And the limit of their liability during business debts.

Subscribers who own a high amount of shares in the company have more rights in decision-making, appointment of directors and business advice than subscribers with a lower amount of shares.

This implies that the more shares you own in a company as a subscriber, the more valuable you are to the company.

Companies Limited by Guarantee

In companies limited by guarantee, no shares are issued to the subscribers and new members and the company is formed without any form of capital.

Here, the subscribers are the founding guarantors of the company and they do not own the company since there is no stock available in the company to purchase.

The subscribers can appoint new directors, they can make crucial decisions regarding the progress of the company and they run and control all the activities of the company.

In most companies limited by guarantee, the guarantors and other bee members do not receive any form of profits.

Since there is no form of shares, all subscribers have equal rights to the decision-making of the company.

What Do Company Subscribers Do?

In every limited company, the roles of the subscribers are written down in the company's article of association and kept as part of the company's official documents. Also, some companies limited by shares include the duties of subscribers in the shareholders' agreement.

During company formation, the subscribers are the ones responsible for making all the rules and regulations governing the company and this gives freedom to every subscriber to contribute or suggest during company registration.

Also, this allows the subscribers to scrape out unwanted rules or rules that are not found suitable for the company.

After writing the rules and regulations in the company's article of association, the company then submit it to the Companies House for review.

If the article of association does not meet the standard and does not go by the Companies Act of 2006 or any other laws regarding the formation of a company, the Companies House will reject the application.

All limited companies have almost the same pattern of articles of association. Below are some of the key responsibilities of a subscriber in a company.

• Subscribers can appoint and remove directors of their company.
• All subscribers are to vote on thriving matters of the company.
• A subscriber can attend and speak at all of the company's meetings.
• A subscriber is entitled to shares of a Company's profits (only if the company is limited by shares).
• They can make any amendments or changes in the article of association of the company.
• A subscriber can inspect a copy of a director's service contracts.
• A subscriber is entitled to a copy of the annual reports of the company.
• Subscribers can inspect the company's statutory reports.
• Subscribers can appoint an auditor to request an account audition from the director.
• A subscriber is entitled to a share of the company's assets in the case of a dissolution (limited by shares)

What Are the Rights of Different Subscribers?

Depending on the type of company, all subscribers do not usually have the same rights in a company.

Companies limited by shares have a a hierarchy of powers in the company according to the amount of shares owned by the subscriber.

Subscribers with higher amounts of shares in the company have higher powers in decision-making and other trivial matters in the company compared to others with lower amounts of shares in the company.

Also, subscribers can have varying powers in a company through different classes of shares.

Shares come in different classes and different amounts I'm companies and due to this, subscribers cannot have the same power.

However, the company can choose to sell out the same quantity and the same class of shares to all their subscribers to make sure they all have equal rights and powers in the company.

In Companies Limited by guarantee, most subscribers have equal rights in taking company decisions and other matters of the company. The subscribers have equal voting rights when making decisions in the company and each subscriber is entitled to a single vote.

However, companies limited by guarantee can also choose to vary the rights of subscribers in their company. In this case, the company dictates in their article of association that there are different classes of membership in the company. The classes include

Voting members: these are members or subscribers of the company that can vote in case of decision-making processes.

Non-voting members: these are members of the company who do not have the right to vote in the company. These members can also be subscribers but without the right to vote.

In the case of decision-making and voting, these members are exempted but they attend company meetings. So mostly, all subscribers do not have equal rights in a company.

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Do Subscribers Pay the Company's Debts?

At most, subscribers do not directly pay for company debts but in most cases, sell off all the assets of the company to pay out debts in the presence of liquidation.

Sometimes subscribers and even members are responsible for the debts of their company and just come up with decisions to clear them off.

• Subscribers and members of limited companies are responsible for the debts of their company up to a certain extent. These extents include
• Up to the fixed value of shares they hold in the company - this only applies to companies limited by shares.
• Up to the amount of their guarantee - only applies to companies limited by guarantee.
• In the case of a dissolution, subscribers are only required to pay the amount of shares they own or the amount they promised to pay as guarantors.

Apart from this, the subscribers are not responsible for any debts the company falls into during its functioning.

Also, a past subscriber is required to pay an amount of their guarantee or shares during the dissolution of a company and liquidation. This only applies if the subscriber opted out of the company within a year before the occurrence of a dissolution.

This amount paid by a past subscriber is only done if:

• The company's debts and liabilities were gotten before that particular member ceased to be a member of the company.
• Payment of costs and other expenses that resulted from adjustments and suggestions brought about by the contributors while the person is still present in the company.
• All this information is included in the company's article of association and must be signed by the subscriber to show that they agree with all these terms.

Upon signing, you must follow all the rules included in the article of association regarding payment of debts in the company.

What is the Legal Amount of Subscribers?

The Companies House do not provide a particular amount of subscribers needed before the formation of a company. Any number of subscribers can be present during the formation of a company.

There is only a minimum of one member but no maximum of subscribers during Company formation.

The subscriber can be a normal person, a business person, a politician or even another company buying shares or serving as a guarantor in a company.

There is also no age requirement for subscribers as companies can have subscribers in various age brackets.

In most small companies, the subscribers are also the directors, members and persons with significant control (PSC) of the company.

Subscribers being directors is common with companies having 2 to 5 subscribers and so have to appoint some or all of their subscriber's directors.

In large companies, directors are mostly different from the subscribers. Sometimes there are few members of the subscribers who have been found worthy thereby electing and appointing them as directors of the company

So it is very important to know there is no limit to the amount of subscribers you can have as a limited company. Also, there are no restrictions to the type of persons liable to become directors of a company.

No age Requirements also attached to being a director of a company.

Difference Between Subscribers and Shareholders or Guarantors

Many times, the terms subscriber, shareholder and guarantors are used interchangeably although they mean different things that are closely related.

All these terms are related to persons in companies but apply to different types of Companies and different forms of Company membership.

Subscriber

As mentioned earlier, a subscriber is a person who is among the founders of a company and has the right to partake in the company's decision-making process.

A subscriber has a higher right than a guarantor or a shareholder in a company.

A subscriber's name is included in the company's Article of Association as they subscribe to the memorandum of the company's formation.

Most times, subscribers are appointed directors of companies and their details are included in the company's official documents.

Shareholders

This only applies to companies limited by shares.

All subscribers are shareholders but not all shareholders are subscribers. This is true because, during the company's formation, all subscribers are required to take at least one share of the company.

During a company's meetings and decision-making, a subscriber is more appreciated compared to a shareholder.

Although shares are of different classes and amounts. Two subscribers one with a higher share value and one with a low share value.

When it comes to the company's decision-making, the subscriber with a higher amount of share value has higher rights than subscribers with lower shares in the company.

Guarantors

A guarantor only applies to companies limited by guarantee. All subscribers are guarantors but not all guarantors are shareholders of a company.

After company formation, guarantors who join the company are only regarded as guarantors and not subscribers.

Once your name is not present in the article of association of a particular company, you are not a subscriber of that company.

All subscribers in companies limited by guarantee have higher rights than other guarantors.

Although in some cases where there are different forms of guarantees ( voting and non-voting members) of a company, the non-voting guarantors do not have rights in decision making as well as other new guarantors.

Differences Between a Subscriber and a Director

A company director is like the board of a company where decisions made by the subscribers are taken for implementation.

There are between the Companies House and the company in terms of relaying information and sending information down to the Companies House.

A director can also be a subscriber. The Subscribers of a company are responsible for electing and appointing directors of a company.

Most times, the directors are also members of the subscribers but in some cases, the company picks others other than the subscribers to become directors of the company.

If the subscribers elect you as a director, you have the right to decline or accept the offer. This is only done during the process of company formation.

Differences Between Subscribers and Company Members

Company members encompass directors, subscribers, persons with significant control (PSC) and even employees and volunteers of the company.

Every subscriber is a company member unless he/she chooses to leave the company and cease to be a member and a subscriber.

Subscribers can appoint other members of the company as they have the right to do so.

In trivial matters of the company, only subscribers take part in the decision-making and not every member of the company.

Subscribers are responsible for changing or amending the article of association of the company which shows every company member their roles to play in the company.

The subscribers relay information to the lower members of the company through the company directors.

Subscribers can deny a person employment in the company if they do not meet the standard of employment or have any complicating records.

Differences Between Subscribers and Persons with Significant Control (PSC)

It is very important to note that a subscriber is not the same as a person with significant control (PSC) in a company.

Even though both of them have high value to the company and actively partake in the decision-making of the company, they mean different things.

There are some criteria necessary for someone to become a person with significant control (PSC) of a particular company as listed by the Companies House. These criteria include

• The person in question has more than 25% of the total company's shares.
• The person holds more than 25% of the right to vote in the company.
• The person is entitled to the right to remove or appoint some board of directors.
• Have a great influence or control over the company. This influence and control could be directly or indirectly on behalf of someone else.

The influence and control of a PSC is mostly determined by the amount of shares they own in the company, the amount they contribute as a guarantee to the company or the benefit of their influence to the company.

In small companies, most subscribers are also the persons with significant control of the company. However, in most large companies, not all subscribers are persons with significant control (PSC) of the company.

The PSCs can be investors who later came to invest massively in the company after company formation. The roles of the PSCs are also documented in the article of association of every company.

PSCs have a very high value to companies and they can be other companies who choose to invest in other companies. PSCs also have the right to give out and send employment to people seeking jobs in the company. They also have the right to request the company's annual reports.

Can a Subscriber Exit a Company?

A subscriber can choose to exit a company. The subscriber just needs to sign an agreement to leave the company.

Before a subscriber can leave a company, they have to sell out their shares of the company to existing subscriber(s), shareholder(s) or third parties who wish to become shareholders of the company.

The company can also choose to buy the shares from the subscriber and sell them to other existing or new shareholder(s). You must exit the company with no shares or anything related to the company and your name will be erased from all official documents containing the list of the Company's subscribers.

Shareholders who are not subscribers follow this same process if they want to opt out of a company as a shareholder. The exit and all payments regarding that subscribers or shareholder should be properly documented and must include all necessary information regarding the exit.

As a company, you cannot forcefully exit a shareholder from your company except with their consent. If they refuse to sign the agreement of exit, then you cannot force them to leave the company. But there are some exceptions to this rule.

If the subscriber in question owes the company its shares and has not paid all the necessary payments to be made as a subscriber of the company, then the company can take legal action by forcefully exiting them from the company.

Even at this, the subscriber must sign the documented forceful exit of the company.

Are Subscribers Appointed?

No, subscribers are not appointed. Once the company is successfully registered, then the company cannot add its subscribers any longer.

The subscribers can only subscribe the the article of association during the initial formation of the company.

When a company is formed, all the names of the subscribers are documented and after formation, no names can be added but names can be removed in the case of an exit.

Conclusion

A company subscriber is a founding member of a company with the right to appoint and remove directors, make decisions and revise the article of association of the company. We should note that a subscriber is different from a shareholder, a guarantor, a company member and a person with significant control (PSC) of a company. Subscribers can leave the company if they want to but must first sell out all their shares of the company in the case of a company limited by shares. In the case of a company limited by guarantee, the guarantor must first pay off all promised money to the company. Have any questions about company subscribers? Kindly ask us here and we would be glad to help you out.