Ordinary Shares Explained for New UK Companies

If you are setting up a UK limited company, one of the first decisions you will make is how the company's shares are structured. For most new private companies limited by shares, the simplest starting point is ordinary shares. In fact, GOV.UK says most companies limited by shares are set up with one class of shares, normally called ordinary shares. These shares will usually carry voting rights and the right to receive dividends.

That sounds straightforward, but "ordinary shares" can affect much more than how ownership is divided. Your share structure determines who owns the company, how voting power is distributed, how profits can be shared, what happens when new shares are issued, and potentially how investors participate in the business. This guide explains what ordinary shares are, how they work, how many to issue, what rights they normally provide, and what new founders should consider before registering their company with Companies House.

What Are Ordinary Shares?

Ordinary shares are the standard type of share used by many UK private limited companies. A share represents a unit of ownership in a company. If a company has 100 ordinary shares and you own 60, you generally hold 60% of those ordinary shares. Ordinary shares will usually give the shareholder three important economic and governance rights:

• The right to vote on certain company decisions
• The right to receive dividends when properly declared
• The right to participate in the company's assets after creditors and other higher-ranking claims have been satisfied if the company is wound up

The exact rights are determined by the company's articles, the terms on which the shares were issued and applicable company law. Companies can also create different share classes with different rights. So while "ordinary" usually means a standard class of ownership, it does not mean every ordinary share in every UK company is necessarily identical in every respect.

How Ordinary Shares Work in a New UK Company

Suppose you form a company called Example Digital Ltd and issue 100 ordinary shares. You could structure the ownership like this:

If the shares carry equal voting rights, Founder A would normally have 60% of the voting power attached to those shares. If the company later declares dividends equally across those ordinary shares, Founder A would normally receive 60% and Founder B 40%. This is why deciding how many shares each founder receives is not merely an administrative exercise. It establishes the initial ownership and voting structure of the company.

What Rights Do Ordinary Shares Usually Give?

1. Voting rights

Ordinary shares will usually carry voting rights. GOV.UK states that ordinary shareholders will usually get one vote on company decisions per share. For example, if you own 70 of 100 ordinary shares, you will normally have 70 votes where the shares have one vote each.

Shareholders may vote on matters that require shareholder approval, including certain changes to the company's constitution, directors and share structure. The company's articles and the Companies Act determine how particular resolutions are passed. Most ordinary resolutions require a simple majority, while certain important decisions require a special resolution with a higher threshold.

2. Dividend rights

Ordinary shareholders can generally participate in dividends when the company lawfully declares them. However, owning ordinary shares does not mean the shareholder can simply withdraw money from the company whenever they want. Dividends are distributions made by the company and must comply with company law and the rights attached to the shares.

Under the model articles, a company may declare dividends by ordinary resolution following a recommendation from the directors, while directors can decide to pay interim dividends. Dividends must also comply with the shareholders' respective rights. For example, if a company has 1,000 equal ordinary shares and declares a £10,000 dividend:

• 500 shares → £5,000
• 300 shares → £3,000
• 200 shares → £2,000

This assumes all shares have equal dividend rights.

3. A claim on remaining assets on winding up

Ordinary shareholders may also participate in the company's remaining assets if the company is wound up and there is anything left after creditors and other claims have been dealt with. This is an important distinction: shareholders do not own the company's assets directly. If your company owns a £200,000 property, owning 50% of the ordinary shares does not mean you personally own half of that property. You own shares in the company, which is a separate legal entity.

How Many Ordinary Shares Should a New Company Have?

There is no universal "correct" number. A company can be incorporated with a relatively small number of shares or a larger number. What matters most is that the structure clearly reflects the intended ownership and provides flexibility for future changes. For example, a founder could issue:

Option A: 1 share

One founder owns 1 ordinary share, This represents 100% ownership.

Option B: 100 shares

One founder owns 100 ordinary shares, This also represents 100% ownership.

Option C: 1,000 shares

One founder owns 1,000 ordinary shares. Again, this represents 100%. The percentage is what matters for ownership, not whether you have 1, 100 or 1,000 shares.

Is It Better to Issue 100 or 1,000 Shares?

For many founders, 100 or 1,000 ordinary shares can make percentage calculations intuitive. For example, with 1,000 shares:

• 500 shares = 50%
• 250 shares = 25%
• 100 shares = 10%
• 50 shares = 5%

This can make future allocations easier to understand. However, there is no requirement to use exactly 100 or 1,000 shares. A company's share structure can later be changed through mechanisms such as allotting additional shares, subdivision or consolidation, subject to the relevant legal requirements. The important point is to design the structure based on the company's expected ownership rather than choosing a number simply because it looks conventional.

What Is the Nominal Value of an Ordinary Share?

Every share has a nominal value. For example, a company might issue 100 ordinary shares with a nominal value of £1 each. The nominal value of the issued shares would then be: 100 × £1 = £100 share capital

GOV.UK explains that the value of an individual share can be set at different amounts and that a low nominal value can help keep a shareholder's liability on winding up to a reasonable amount. Nominal value should not be confused with the market value of a share.

A £1 ordinary share does not necessarily mean that the business is worth £1 per share. A company could have 100 ordinary £1 shares and later be valued at £500,000. The implied economic value would then be very different from the nominal value.

Ordinary Shares and Limited Liability

One of the attractions of a company limited by shares is limited liability.A shareholder's liability is generally limited to the amount they agreed to contribute t o the company for their shares. GOV.UK explains that shareholders' liability in a company limited by shares is limited to the amount originally invested.

Suppose you subscribe for 100 ordinary shares at £1 each and pay the full £100. If the company later fails, you do not normally become personally responsible for all of the company's debts simply because you are a shareholder. There are important exceptions in company law, insolvency and situations involving personal guarantees or wrongdoing, so limited liability should not be interpreted as absolute protection from every possible liability.

Paid and Unpaid Ordinary Shares

Shares can be issued as fully paid or with some amount remaining unpaid. For a simple new company, founders commonly issue shares that are fully paid. For example:

• 100 ordinary shares
• £1 nominal value each
• £100 total nominal value
• £100 paid

Companies House requires information about the number and value of shares and how much has been paid or remains unpaid as part of the company's statement of capital. For most straightforward startups, keeping the initial share structure simple can make administration easier.

Ordinary Shares vs Preference Shares

Ordinary shares are not the only possible share class, A company can create different classes of shares with different rights. For example, an investor might receive preference shares that have preferential dividend or capital rights, while founders retain ordinary shares. A simplified structure could look like this:

The actual rights must be properly documented. Companies House requires the statement of capital to identify each class and the rights attached to it. This is why founders should not create multiple share classes merely because they sound sophisticated. Different classes should have a clear commercial purpose.

Can Ordinary Shares Have Different Rights?

Yes, depending on how the company structures its share classes and constitutional documents. For example, a company might have:

• Ordinary A shares with full voting rights
• Ordinary B shares with limited voting rights
• Preference shares with priority dividend rights

The label "ordinary" alone should not be relied upon to determine every right. The prescribed particulars and constitutional documents need to be examined to understand what each class actually provides. For a new company expecting outside investment, employee equity or different founder arrangements, getting these rights right at the beginning can prevent significant restructuring later.

Ordinary Shares and Founder Ownership

For two founders, ordinary shares are often used to establish the initial ownership split. For example:

Equal founders

• Founder A: 500 ordinary shares
• Founder B: 500 ordinary shares
• Total: 1,000

Each owns 50%.

Majority founder

• Founder A: 700 ordinary shares
• Founder B: 300 ordinary shares
• Total: 1,000

Founder A owns 70%.

Founder and early investor

• Founder: 800 ordinary shares
• Investor: 200 ordinary shares
• Total: 1,000

The investor owns 20%, But founders should look beyond the initial percentages. If the company later issues new shares to an investor, everyone's percentage can change.

What Happens When a Company Issues More Ordinary Shares?

Issuing new shares can dilute existing shareholders, Suppose a company has 1,000 ordinary shares:

• Founder A: 600
• Founder B: 400

Founder A owns 60%.

The company then issues 1,000 new shares to an investor. After the issue:

• Founder A: 600
• Founder B: 400
• Investor: 1,000
• Total: 2,000

Founder A now owns 30%, and Founder B owns 20%. Their number of shares has not decreased, but their percentage ownership has. Companies must comply with the applicable rules when issuing shares. A limited company generally needs to tell Companies House about an allotment within one month using the relevant filing, including a statement of capital. Pre-emption rights may also be relevant when new shares are issued, depending on the circumstances and whether those rights apply or have been properly disapplied.

Ordinary Shares and People with Significant Control

Share ownership can also affect a person's PSC status, A person who owns more than 25% of a company's shares or voting rights will generally qualify as a person with significant control. For example:

• 60% ordinary shareholder → normally a PSC
• 40% ordinary shareholder → normally a PSC
• 25% exactly → does not meet the "more than 25%" shareholding condition solely on that basis, although other control conditions may apply
• 10% ordinary shareholder → normally not a PSC solely because of the shareholding

GOV.UK specifically identifies people with more than 25% of the shares or voting rights as an example of a PSC. This is another reason why founders should consider the ownership structure carefully when incorporating.

Ordinary Shares and the Companies House Statement of Capital

When registering a company limited by shares, you provide Companies House with information about the company's shares and shareholders. The statement of capital includes information such as:

• The total number of shares
• The total nominal value
• The class of shares
• The rights attached to each class
• Amounts paid or unpaid

GOV.UK confirms that this information forms part of the company's incorporation documentation. This means the share structure is not merely an internal arrangement between founders. Important elements are recorded as part of the company's statutory information.

Common Mistakes When Setting Up Ordinary Shares

Issuing shares without considering future investment

A structure that works for one founder may become awkward when investors or employees need equity.

Assuming all ordinary shares are automatically identical

Share rights depend on the company's documents and the terms attached to the shares.

Confusing nominal value with business value

A £1 share does not mean the company is worth £1.

Ignoring dilution

Future share issues can substantially reduce an existing shareholder's percentage.

Creating complicated share classes unnecessarily

Complexity should solve a real business problem, not simply make the company structure look sophisticated.

Failing to document changes

New allotments, transfers and other share capital changes can trigger Companies House filing obligations.

A Practical Ordinary Share Setup for a New Founder

For a straightforward one-founder UK company, a simple structure might be:

• Company: Private limited company
• Share class: Ordinary
• Shares issued: 100
• Nominal value: £1 each
• Founder: 100 shares
• Ownership: 100%
• Voting: 1 vote per share, subject to the articles
• Dividends: According to the rights attached to the shares

For two equal founders:

• Total shares: 100
• Founder A: 50
• Founder B: 50
• Ownership: 50% each

For a company expecting investment soon, however, it may be worth planning the cap table and shareholder rights before incorporation rather than treating the initial share issue as a permanent structure.

Frequently Asked Questions

Are ordinary shares the same as ownership?

Ordinary shares represent ownership interests in a company, but the exact rights attached to them depend on the company's share class, articles and applicable law.

Do ordinary shares give voting rights?

Usually. GOV.UK states that ordinary shareholders will usually have one vote per share, although the company's constitutional arrangements can affect the precise position.

Do ordinary shareholders automatically receive dividends?

They can receive dividends where the shares carry dividend rights and the company lawfully declares a dividend. A shareholder cannot simply withdraw company profits whenever they choose.

How many ordinary shares should a new UK company issue?

There is no universal number. Many founders choose a simple number such as 100 or 1,000 because percentages are easy to calculate, but the appropriate structure depends on the company's ownership and future plans.

Can a UK company have only one ordinary shareholder?

Yes. A company limited by shares needs at least one shareholder, and that shareholder can own 100% of the company.

Can ordinary shares be transferred?

Generally, shares can be transferred, but the company's articles and any shareholders' agreement may impose restrictions or procedures that must be followed.

Can a company issue more ordinary shares later?

Yes, subject to the applicable company law, shareholder authorities, pre-emption rights and the company's articles. A new allotment generally needs to be reported to Companies House within one month.

Are ordinary shares suitable for investors?

They can be, particularly for straightforward businesses. However, investors may negotiate preference shares or additional contractual protections where they require different economic or governance rights.

Does owning ordinary shares make someone a PSC?

Not automatically. A person who owns more than 25% of the shares or voting rights will generally be a PSC, but other control tests can also apply.

Conclusion

Ordinary shares are the foundation of the ownership structure for many UK private limited companies. They usually provide voting rights, dividend rights and an economic interest in the company, while allowing founders to divide ownership between themselves and future investors. GOV.UK confirms that most companies limited by shares are initially established with one class of shares, normally ordinary shares.

For a simple new business, a straightforward ordinary share structure is often all that is needed. But founders should still think beyond the incorporation form. Consider who should own the company, how voting power should work, whether future investors may be introduced, how dilution will affect existing shareholders, and whether different share classes may eventually be necessary.

For global founders establishing a UK company remotely, understanding ordinary shares is particularly important because the share structure forms part of the company's legal and commercial foundation from day one. IncorpUK, as a UK company formation and management platform for global founders, sits within that wider business infrastructure, while complex investment structures and bespoke shareholder arrangements may require advice from qualified legal or tax professionals.