Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Share Capital definition

What does Share Capital mean? In practice, share capital is the equity a company raises by issuing shares to its members. It records the nominal (par) value of shares allotted since incorporation and underpins shareholder rights, pre-emption on new issues, distributions and capital maintenance. Across England & Wales, Scotland and Northern Ireland (Companies Act 2006) and Ireland (Companies Act 2014), “share capital” is a widely used statutory and accounting term rather than a single defined expression. Key features include: - Issued (allotted) share capital is stated at nominal value and is distinct from any share premium. - On the balance sheet it appears as called-up...

Share capital transactions: accounting under the UK Companies Act 2006, including dividends and distributable reserves, bonus issues, redenomination, sub-division and consolidation, reductions, buybacks, and classification of redeemable shares

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Practice notes

Capital Maintenance rule

Under English company law, a Limited company with Share Capital is required to preserve that capital. The capital maintenance principle exists to safeguard a company’s creditors by making sure that the assets which represent the company’s capital remain available to them for future Recourse. A company’s share capital can be affected by certain events that occur from time to time over the course of its life, in accordance with the provisions of the Companies Act 2006 (CA 2006). These include:

the issue of shares, on incorporation and thereafter, including bonus issues
the redenomination of share capital
the sub-division and consolidation of shares
reductions of capital
share buybacks
the issue of redeemable shares and their eventual redemption

This Practice Note sets out, in brief, the accounting treatment for each of these possible events in turn. It also considers matters relating to distributable reserves, including the payment of dividends...

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Tessa Park

Moore Kingston Smith

Tessa is technical partner of Kingston Smith LLP where she is responsible for preparing and presenting technical guidance and training on all aspects of financial reporting including FRS 102 and International Financial Reporting Standards (IFRS). Prior to joining Kingston Smith from a technical role within the mid tier, she worked with growing and entrepreneurial businesses, including listed companies, in a number of roles including as an audit manager in a Big Four firm....

Web page updated on 21/05/2026

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