| Under the UK Companies Act 1985, shares must have a par or nominal value. The nominal value is set by the company issuing the shares and it is unrelated to market value. The amount of shares that a company can issue to shareholders is defined by its memorandum of association. The memorandum of association states the:
- amount of share capital the company will have e.g. £100,000
- division of the share capital into shares of a fixed amount e.g. 400,000 ordinary shares with a nominal value of 25 pence each
The amount of share capital stated in the memorandum of association is the company's 'authorised' capital. There is no maximum to any company's authorised share capital and no minimum share capital for private limited companies; however, in the UK a public limited company must have an authorised share capital of at least £50,000 and, if it is trading, issued capital of £50,000.
Issued capital is the value of the shares issued to shareholders. Share capital that is 'issued' to shareholders will have a nominal value i.e. a very small value in comparison to true value. The amount of issued capital cannot exceed the amount of the total authorised capital. When shares are issued the person subscribing must pay cash or equivalent value of at least the nominal amount. Where the share is worth more than its nominal amount, a premium is paid.
A company can increase the number of shares already in issue through share reorganisation techniques such as Share Splits
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