When
you form a new company, the persons who signs its Memorandum and Articles
are called subscribers, whether you are setting up a company limited
by shares or limited by guarantee.
Subscribers of a company limited by shares are also the shareholders
of the company. The shareholders of a company are its owners/beneficiaries.
They decide matters such as the activities it can carry on, its name
and its share capital.
Each shareholder must agree to pay a sum to the company for the shares
issued to him or her by the company, at the time of issue. No shareholder
can ever be asked to pay any more for those shares, even if things go
wrong and the company ends up owing more than it can pay.
In
legal terms the shareholders of a company have limited liability for
their company's debts. By contrast, sole traders or partners in a partnership
have unlimited liability for the debts of businesses they own and can
end up losing everything. For partners, this liability is joint and
several which means that one partner can end up paying all of their
business's debts simply because the others cannot afford to or cannot
be found.
The
shareholders delegate responsibility for the day to day management of
the company's business to the directors. Directors have many duties
and responsibilities e.g. to manage the company's business in its best
interests, even if those conflict with the directors' personal interests.
But the directors have no liability for their company's debts either,
provided they have not breached their duties by mismanaging the company's
affairs.
Shareholders
and directors can be the same people, but do not have to be. This means
shareholders can invest in a company without having to be involved in
its management. This can be useful - shares can be issued to employees,
family members who are not otherwise involved with the company or outside
investors.
If
you want to sell shares to outside investors, you should always take
professional advice.
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