Issued Shares vs Authorised Shares: What’s the Difference?

When setting up a company, founders often come across terms such as issued shares, allotted shares, share capital, nominal value, and authorised share capital. These terms can look interchangeable, but they describe different concepts and understanding the distinction matters when deciding ownership, bringing in investors, or changing a company’s share structure.

The most important point for UK company owners is this: the traditional concept of “authorised share capital” was abolished for most UK companies by the Companies Act 2006. Today, a company is generally not restricted by a statutory authorised share capital limit. Instead, the focus is on the shares the company has actually allotted and issued, together with the rights attached to those shares. This guide explains the difference in straightforward terms, shows how the numbers work, and explains what founders and shareholders should consider when creating or increasing shares in a UK limited company.

Issued Shares vs Authorised Shares: The Short Answer

Issued shares are shares that a company has actually issued to shareholders. They represent part of the company's ownership structure and are recorded in its share capital information.

Authorised shares, in the traditional UK company-law sense, referred to the maximum number or nominal value of shares a company was permitted to issue under its authorised share capital.

However, for most companies incorporated under the Companies Act 2006, there is no longer a statutory authorised share capital limit. Companies can generally issue additional shares, provided the directors have the necessary authority to allot them and the company follows the appropriate legal and filing requirements. So if you are forming a modern UK private limited company, you will usually deal with issued or allotted shares, rather than choosing an authorised share capital limit.

What Are Issued Shares?

Issued shares are shares that have actually been issued to members of the company. For example, suppose you incorporate a company with:

• 100 ordinary shares
• £1 nominal value per share
• One shareholder

The company has 100 issued shares, with a total nominal share capital of £100. The shareholder owns 100% of the company's issued shares. Companies House records share information through statements of capital, including the number and type of shares, their nominal value and the rights attached to each class.

Why issued shares matter

Issued shares determine the company's current ownership structure. If one founder owns all 100 issued ordinary shares, that founder normally holds 100% of the voting and economic rights associated with those shares, assuming they carry standard ordinary-share rights.

If the company later issues another 100 shares to an investor, there are now 200 issued shares. If the original founder retains 100 and the investor receives 100, each owns 50%. This is why issuing new shares can change ownership percentages.

What Were Authorised Shares?

Before the Companies Act 2006 reforms took effect, companies commonly had an authorised share capital. This represented the maximum nominal value of shares the company was authorised to issue. A company could not normally issue shares above that limit without taking the necessary steps to increase its authorised capital.

For example, an older company's documents might have stated:

Authorised share capital: £100,000 divided into 100,000 ordinary shares of £1 each.

The company might initially issue only 1,000 of those shares. That meant:

• Authorised: 100,000 shares
• Issued: 1,000 shares
• Unissued: 99,000 shares

The remaining shares represented capacity that had not yet been issued. That historical distinction is still encountered in older company documents and some overseas-company contexts, which is why the terminology can be confusing. But the statutory authorised share capital requirement for UK companies was abolished by the Companies Act 2006.

The Key Difference Between Issued and Authorised Shares

The easiest way to understand the difference is to think about actual ownership versus historical issuing capacity.

The practical distinction for a modern UK private limited company is therefore much simpler: look at the company's current issued share capital and the rights attached to those shares.

Is Authorised Share Capital Still Relevant in the UK?

Yes, but mainly as a historical or contextual concept. Some older companies may still have references to authorised capital in their constitutional documents or historical records. HMRC notes that the Companies Act 2006 abolished the requirement for companies to have authorised share capital from 1 October 2009.

The term can also appear when dealing with overseas companies. For example, Companies House guidance for registering an overseas company distinguishes between authorised or nominal capital and the amount of share capital actually issued. Therefore, if you are reading an old company's documents or dealing with an overseas corporate structure, don't automatically assume that “authorised capital” has the same meaning as current UK issued share capital.

How Many Shares Should a UK Company Issue?

There is no universal number that every startup should use. A founder could establish a company with:

• 1 share
• 10 shares
• 100 shares
• 1,000 shares
• or another appropriate number.

What matters is the ownership percentage, share rights, nominal value and future plans, rather than simply having a large number of shares.

Example: 100 shares

Imagine two founders create a company and issue:

• Founder A: 60 ordinary shares
• Founder B: 40 ordinary shares

There are 100 issued shares. Their ownership is:

• Founder A: 60%
• Founder B: 40%

If the company later wants to give an investor 20 new shares, the total becomes 120 shares. The ownership would then be:

• Founder A: 60/120 = 50%
• Founder B: 40/120 = 33.33%
• Investor: 20/120 = 16.67%

The investor's shares did not simply come from Founder A or Founder B. They were newly issued shares, which increased the company's issued share capital and diluted the existing shareholders' percentages.

Issued Shares vs Shares Held by Shareholders

Another important distinction is between the company's issued shares and the shares held by a particular shareholder. Suppose a company has 1,000 issued ordinary shares. One shareholder might own 700, while another owns 300. The company has 1,000 issued shares, but the first shareholder owns only 700. This matters when calculating:

• Ownership percentages
• Voting control
• Dividend entitlements
• Investor dilution
• Shareholder agreements
• Potential changes in control

The rights attached to the shares also matter. Companies can have different classes of shares with different voting, dividend and capital rights.

What Is Nominal Value?

Nominal value is another concept that is often confused with the market value of a company. A share might have a nominal value of £1, but that does not mean the company is worth £1 per share in the commercial market. For example, a startup could have:

• 1,000 ordinary shares
• £1 nominal value per share
• £1,000 issued share capital

The company could nevertheless be worth £500,000, £5 million or more depending on its assets, revenue, intellectual property, investment and market prospects. Companies House specifically notes that share capital is not the same thing as the value of the company.

Why nominal value still matters

Nominal value can affect the amount shareholders are liable to contribute if shares are not fully paid. For a company limited by shares, shareholder liability is generally limited to any amount unpaid on the shares they hold. If the shares are fully paid, there is normally no further liability merely because the company has debts.

What Happens When a Company Issues More Shares?

Issuing additional shares can change both the company's capital structure and the percentage ownership of existing shareholders. Companies House requires companies to notify it when new shares are issued. GOV.UK currently states that a company must tell Companies House within one month if it issues more shares. The filing includes information such as the company's total shares, their value and how much has been paid or remains unpaid.

The company also needs to consider whether the directors have authority to allot the shares. Under the Companies Act 2006, directors generally need the appropriate authority to allot shares. For certain private companies with a single class of shares, specific statutory provisions can provide directors with allotment authority, subject to the relevant conditions and the company's articles. This is one reason founders should not treat issuing shares as simply changing a number on Companies House.

Issuing Shares to Investors: What Founders Should Consider

For a startup preparing for investment, the share structure becomes particularly important. Before issuing shares to an investor, consider:

1. Ownership dilution

New shares can reduce the percentage ownership of existing shareholders.

2. Share class

An investor might receive ordinary shares or a different class with specific rights.

3. Voting rights

Not every class of share necessarily has identical voting rights.

4. Dividend rights

Different share classes can have different rights to dividends.

5. Rights on winding up

Some preference shares can have priority over ordinary shares when company assets are distributed.

6. Pre-emption rights

Existing shareholders may have rights that affect how new shares can be offered or issued.

7. Investment documentation

A share issue may need supporting resolutions, subscription documents, shareholder agreements or updated constitutional arrangements depending on the transaction. For anything beyond a straightforward founder share issue, professional legal or accounting advice can be worthwhile.

A Practical Example for a New UK Company

Consider a non-UK founder establishing a UK limited company. They decide to issue: 1,000 ordinary shares at £1 each, The founder receives all 1,000 shares. At incorporation:

• Issued shares: 1,000
• Nominal value: £1 each
• Total nominal share capital: £1,000
• Founder ownership: 100%

Six months later, the founder raises investment by issuing 250 new ordinary shares to an investor. The new structure becomes:

• Founder: 1,000 shares
• Investor: 250 shares
• Total issued shares: 1,250

The founder now owns 80%, while the investor owns 20%. The key point is that the company did not need to “increase its authorised shares” from 1,000 to 1,250. The modern UK system generally does not operate through a statutory authorised-share-capital ceiling. Instead, the company made a further allotment and updated its share capital records appropriately.

Issued, Allotted and Authorised Shares: Are They the Same?

Not exactly.

Authorised shares are primarily a historical concept in UK company law.

Allotted shares are shares that have been allocated to a person who has acquired an unconditional right to be issued with them.

Issued shares are shares that have been issued and form part of the company's issued share capital.

Companies House explains that shares are issued when a person is registered as a member in the company's register of members. In everyday discussions about a straightforward UK private company, “issued shares” is usually the most useful concept for understanding the company's current ownership structure.

How to Check a Company's Issued Shares

A company's public Companies House information can help you understand its current share capital. You can review the company's filing history and statements of capital to see information about:

• Number of shares
• Share classes
• Nominal value
• Total share capital
• Share rights
• Changes resulting from new allotments

Companies House makes company information publicly available through its register. Its WebFiling guidance also explains that issued share capital is displayed by currency, share type and total number of shares issued. However, remember that a company's current share capital information is not necessarily a complete picture of its commercial value or the terms of every private agreement between shareholders.

What This Means for Global Founders

For international entrepreneurs forming a UK company, the terminology can be particularly confusing because different jurisdictions still use “authorised share capital” in different ways. When setting up a UK private limited company, focus on:

1. How many shares you want to issue.
2. Who will own those shares.
3. The nominal value of each share.
4. The rights attached to each class.
5. Whether shares are fully paid.
6. How future investment could affect ownership.
7. Whether directors have authority to allot additional shares.
8. The Companies House filing requirements following an issue.

IncorpUK can help global founders understand the administrative side of forming and managing a UK company, while decisions involving complex share structures, investment terms or legal rights should be reviewed with an appropriately qualified professional.

Frequently Asked Questions

Is authorised share capital still required for a UK limited company?

Generally, no. The Companies Act 2006 abolished the statutory requirement for companies to have authorised share capital from 1 October 2009.

What are issued shares?

Issued shares are shares that have actually been issued by the company and form part of its issued share capital. They are allocated to shareholders and represent ownership interests in the company.

What are authorised shares?

Historically, authorised shares represented the maximum number of shares a company could issue under its authorised share capital. This statutory concept was abolished for most UK companies under the Companies Act 2006.

Can a UK company issue more shares later?

Yes. A company can generally increase its issued share capital by allotting additional shares, provided the necessary authority exists and the company follows the relevant legal and Companies House filing requirements.

Does issuing new shares dilute existing shareholders?

Usually, yes. If new shares are issued to another person and existing shareholders do not receive additional shares proportionately, their percentage ownership can decrease.

Does share capital equal the company's value?

No. Share capital is based on the nominal value of issued shares. It does not necessarily reflect the company's market value, assets, revenue or investment valuation.

Can a company have different types of shares?

Yes. UK companies can have different share classes with different rights, including voting, dividend and capital rights.

Where can I see a company's issued shares?

Companies House filings, particularly statements of capital and relevant share allotment filings, provide information about a company's issued share capital and share structure.

Conclusion

The distinction between issued and authorised shares is easier to understand once you recognise that authorised share capital is largely a historical UK company-law concept, while issued shares are central to the modern company structure. Issued shares represent the shares a company has actually issued to its members. They determine the current ownership structure and can affect voting rights, dividends and dilution.

For most modern UK private limited companies, there is no statutory authorised-share-capital ceiling that founders need to set when incorporating. Instead, founders should concentrate on creating an appropriate share structure, understanding the rights attached to each class, maintaining accurate company records and properly reporting subsequent share issues to Companies House.

For a simple founder-owned company, this can be straightforward. Once you introduce investors, multiple share classes, employee equity or more complex ownership arrangements, however, the consequences become more significant. The best approach is to design the share structure around the company's current ownership, future funding plans and governance needs, rather than choosing a share number simply because it is conventional.