What is a shareholding?

Put at its simplest, a shareholding is essentially an allocation of shares in a company. A shareholder is someone that owns at least one share in a company. Shares in turn equate to a portion of ownership in a company. The extent of this ownership can differ depending on how many shares are owned. For example, if you own 100% of the shares in a company, you are the sole shareholder and therefore the sole owner. You can own shares in your capacity as an individual, through a company or through a trust. Shareholders invest money into a company in order to buy the shares and can profit from the company when things are going well. 

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What types of company can you have a shareholding in? 

The primary distinction to be aware of is between public limited companies and private companies limited by shares. Where shares are being offered to the public, they will usually have to be a public limited company. The main difference is that a public company’s shares are typically traded on a stock exchange (meaning that the company is listed) whereas this does not happen for a private company. There are special rules that govern public companies, including that shares in public companies must be issued through an Initial Public Offering (IPO).  

Unlike private companies, where shares are generally held by one person or a limited group of people, shares in public companies are offered to the public at large on public stock exchanges, such as the London Stock Exchange. There can therefore be many hundreds or even thousands of shareholders in a large public company. This gives public companies a substantial advantage since they can reach a much wider audience to buy their shares. It also makes buying and selling shares a lot easier. However, more stringent rules are attached to these companies to offer protection. 

With public companies there is a minimum allotted share capital requirement, currently £50,000. Private companies do not have the same requirements. 

What types of shareholder are there? 

It is not only individuals who can be shareholders, it is also possible for other companies or organisations to hold company shares. 

Are there different types of shares? 

A company’s share capital will often include more than one type of share. This can mean that the consent of more than one class of shareholder will be needed where decisions have to be made.  

The most common type of shares are ordinary shares. These carry one vote per share. If a company only has one type of share, then these will usually be ordinary shares. Ordinary shares in a limited liability company (where liability rests with the company as a legal entity as opposed to the individual shareholders) generally grant their holders several rights. These rights include the right to: 

• Attend general meetings 

• Vote on who will sit on the board of directors 

• Exercise one vote per share on a poll