How To Set a Share Value When Issuing Shares in Your UK Company

If you’re about to bring in an investor, reward a co-founder, or set up an employee equity plan, one question tends to stop small business owners in their tracks:

How do you choose a value for each share when issuing shares in your UK company?

It’s a fair question. Shares aren’t just “a percentage of the business” on paper - the numbers you put on the paperwork can affect your legal compliance, your cap table, your investor negotiations, and (in some cases) tax outcomes.

The good news is: you don’t need to overcomplicate it. But you do need to understand what “share value” means in UK company law, and what you’re actually deciding when you set it.

Below, we’ll walk you through the key concepts, the practical approaches UK startups and SMEs use, and the legal steps to get it right from day one.

What Does “Value Per Share” Actually Mean In The UK?

Before you can sensibly choose a value for each share, it helps to separate three terms people often mix up:

• Nominal value (also called “par value”): the fixed minimum value of a share set in your company’s constitution. Commonly £0.01 or £1.
• Issue price: what the shareholder actually pays for the shares when you issue them (this can be the same as nominal value, or higher).
• Market value / “true value”: what the shares are arguably worth based on your company’s current valuation, performance, assets, and prospects.

In most UK private companies, the nominal value is low (like £0.01), and the issue price changes over time depending on what stage the business is at.

For example:

• At incorporation, you might issue 100 ordinary shares at £0.01 each to the founder (total £1 paid in).
• Later, you might issue new shares to an investor at £1.00 or £10.00 per share depending on your valuation.

The key point: the “value per share” on paper is not always the same as what someone pays, and not always the same as what the shares are worth.

And because different contexts care about different “values”, you’ll usually make two decisions when you issue shares:

• What is the nominal value of each share?
• What is the issue price for this particular share issue?

What Are Your Options When Setting A Share Value?

When you’re deciding how to choose a value for each share, you’ll usually land in one of these common scenarios.

1) Issuing Shares At Nominal Value (e.g. £0.01)

This is common when:

• you’re incorporating a company and issuing founder shares;
• you’re adding a co-founder very early;
• the company hasn’t built meaningful value yet (or you’re deliberately keeping it simple at the start).

Pros: simple, cheap, and easy to explain.

Cons: if the shares are actually worth more than nominal value (especially for employees), there can be tax issues, and it may raise investor questions later if your cap table looks “too cheap” compared to your claimed valuation.

2) Issuing Shares At A Premium (Above Nominal Value)

If your nominal value is £0.01 but you issue the shares for £1.00 each, the extra £0.99 is the share premium.

Share premium is normal in investment rounds and growth-stage issuances. It can help reflect the commercial reality that your company has built value beyond its initial incorporation.

Pros: aligns better with valuation, often what investors expect, and can reduce tax risk in some cases.

Cons: requires more careful documentation and accounting (because share premium is treated differently to share capital).

3) Issuing Shares Based On A Valuation (Pre-Money / Post-Money)

Where there’s a negotiated valuation (for example, in a seed round), the share price is usually calculated from:

• the company valuation (agreed with the investor); and
• the fully diluted share count (including existing shares, plus any options/warrants if applicable).

This is where the phrase “share price” becomes a commercial negotiation - and where getting the maths and the legal documents consistent is critical.

At this stage, it’s also common to document the commercial deal first (valuation, amount invested, governance rights) in a Term Sheet, then convert that into the final share issue paperwork.

4) Issuing Different Classes Of Shares With Different Rights

Sometimes the question isn’t just “what is each share worth?” but “what rights attach to each share?”

If you have (for example) ordinary shares and preference shares, you may set different prices and rights for each class. That can affect:

• dividends,
• voting rights,
• distribution rights on an exit, and
• investor protections.

Because share rights are typically set out in your constitution, you’ll want to make sure your Articles of Association actually support what you’re trying to do.

How To Choose A Value For Each Share (Practical Methods That Work For Small Businesses)

There isn’t one “correct” share value for every company. The right approach depends on why you’re issuing shares, who you’re issuing them to, and what stage your business is at.

Here are practical ways small businesses usually approach the decision.

1) Start With Your Purpose: Founder Equity, Investment, Or Incentives?

Ask yourself what you’re trying to achieve:

• Founder/co-founder equity: often issued at nominal value early on.
• Raising investment: usually issued at a price reflecting a negotiated valuation (often above nominal value).
• Employee/contractor incentives: can be sensitive because of tax and valuation rules (you may need a defensible valuation).

If you’re giving equity to multiple people, it’s also smart to set the ground rules early in a Shareholders Agreement, so everyone understands how decisions are made, what happens if someone leaves, and how future funding rounds are handled.

2) Decide Your Nominal Value (Par Value)

In the UK, the nominal value is usually kept low (like £0.01). This is common because:

• it keeps the minimum “paid up” amount low when issuing shares; and
• it reduces friction if you issue lots of shares (e.g. 10,000 shares at £0.01 each is still only £100 nominal).

Importantly, you generally can’t issue a share below its nominal value. So if your nominal value is £1, you can’t issue shares at £0.10 each later - which is why many startups choose £0.01 early to keep flexibility.

Nominal value is more about legal structure than valuation, but it still matters because it sets the minimum issue price.

3) Work Out A Sensible Issue Price For The Specific Share Issue

Your issue price is what the new shareholder pays per share. Common ways to set it include:

• Agreed valuation method: decide the company valuation, then calculate the per-share price based on shares in issue.
• Comparable transactions: if you previously issued shares at £X recently, that can be a reference point (assuming the business hasn’t dramatically changed).
• Asset-based view: sometimes used in asset-heavy businesses (less common in early-stage startups).
• “Sweat equity” / founder arrangements: where value is tied to work contributed, not cash (this needs careful structuring).

Simple example (investment round):

• Your company has 1,000 ordinary shares in issue.
• You agree a pre-money valuation of £100,000.
• That implies a price of £100 per share (pre-money).
• If an investor puts in £25,000 at £100/share, they receive 250 new shares.
• After the issue, there are 1,250 shares in total (before considering options, if any).

This is why share numbers matter: changing the number of shares changes the per-share price, even if the valuation is the same.

4) Don’t Forget Tax (Especially For Employees And “Discounted” Shares)

If you issue shares to someone at an “undervalue” (i.e. the issue price is less than market value), there may be tax consequences, particularly for employees and directors.

Tax planning, valuation, and accounting treatment are outside the scope of a general guide like this, and Sprintlaw doesn’t provide tax or accounting advice. But from a legal risk perspective it’s worth treating this as a red flag: if you’re issuing shares to employees, contractors, or family members for a very low price, you should pause and get specialist advice to avoid unexpected liabilities.

In plain terms: choosing a low share price can feel like a shortcut, but it can create avoidable problems later.

5) Make Sure Your Paperwork Matches The Commercial Deal

Even if you’ve agreed a valuation in principle, you need the legal documents to reflect it properly - including the share class, the price, the payment terms, and the rights that come with the shares.

This is typically handled through a Share Subscription Agreement (or similar structure) and the supporting company approvals.

Legal And Compliance Steps When Issuing Shares In The UK

Once you’ve worked out how to choose a value for each share, the next step is making sure the issue is legally valid and properly recorded.

As a UK company, share issues aren’t just a “handshake deal” - they need approvals, records, and Companies House filings.

1) Check Your Company’s Constitution And Shareholder Controls

Before issuing shares, check:

• Do your Articles allow the directors to allot shares, or do you need shareholder approval?
• Are there pre-emption rights (existing shareholders get first refusal on new shares)?
• Are there restrictions on issuing new share classes?

If you’re early stage and still setting up, these rules may be built into your Articles of Association and any shareholders arrangement you’ve agreed.

2) Get The Right Approvals (Board And Sometimes Shareholders)

Depending on your setup, you may need:

• a directors’ resolution approving the allotment and issue; and/or
• a shareholders’ resolution approving the allotment authority or disapplying pre-emption rights.

Many small companies record this in a Directors Resolution and keep it with their statutory records.

3) Issue The Shares And Update Your Statutory Registers

After approval:

• the new shareholder subscribes for the shares (and pays the issue price);
• you issue share certificates (if you use them); and
• you update the register of members and other statutory registers.

This is where admin mistakes happen most often - and those mistakes can cause delays later when you’re raising money, selling the business, or doing due diligence.

4) File The Right Companies House Forms (Usually SH01)

If you allot new shares, you generally need to file a return of allotment (Form SH01) with Companies House within the required deadline (typically 1 month from the allotment).

You should also keep your confirmation statement and company records accurate, including the company’s statement of capital.

5) Consider How This Impacts Future Fundraising

Share issues affect your cap table, voting control, and investor perception.

If you’re planning to raise further funding, it’s worth thinking ahead now so you don’t paint yourself into a corner later (for example, issuing too many shares informally without clear rights and restrictions).

This is also why it’s so common to handle early fundraising and founder arrangements with proper documentation from the beginning - especially if you’re planning to scale quickly.

Common Mistakes When Choosing A Share Value (And How To Avoid Them)

Most founders don’t get into trouble because they’re trying to do anything wrong - it’s usually because share pricing feels “administrative” and gets rushed.

Here are the issues we see most often.

Issuing Shares Without Checking Authority Or Pre-Emption Rights

If your constitution or shareholders agreement requires approvals (or gives existing shareholders first refusal), skipping those steps can lead to disputes and, in some cases, require corrective steps to put the allotment on a proper footing.

That’s one reason it’s worth having your governance documents clear and up-to-date, including your Shareholders Agreement.

Setting A Nominal Value That Limits Flexibility

Choosing a nominal value of £1 (instead of £0.01) isn’t “wrong”, but it can make future share issues less flexible - because you can’t issue below nominal value.

If you’re not sure what structure best suits your growth plans, getting advice early is usually cheaper than fixing it later.

Confusing “Percentage Owned” With “Value Per Share”

It’s easy to think “I’ll just give them 10%” and assume the numbers will take care of themselves.

But dilution, share classes, and valuation-based pricing mean that “10%” can be implemented in multiple ways - some of which are fair, and some of which can create tension or unintended consequences.

Underpricing Shares For Employees Or Directors Without Considering Tax

If shares are issued at a big discount to market value, the recipient might face tax as if they received extra income - and the company can also end up with reporting obligations.

Where employees are involved, this can become especially sensitive. (And if you’re employing people generally, you’ll want your foundations right too, including an Employment Contract for new hires.)

Not Documenting The Deal Properly

Verbal agreements and informal email trails are a recipe for confusion when memories fade or circumstances change.

For many issuances - especially where money is paid - you’ll want a proper Share Subscription Agreement so the price, payment, warranties, and conditions are properly documented.

Key Takeaways

• When you’re choosing a value for each share, you’re usually dealing with both nominal value (par value) and issue price (what the new shareholder pays).
• Most UK startups use a low nominal value (often £0.01) to keep flexibility for future share issues.
• Your issue price should make commercial sense for the purpose of the share issue (founder shares, investment, employee incentives) and should align with any valuation discussions.
• Issuing shares above nominal value creates share premium, which is common in investment rounds and needs proper accounting and paperwork.
• Always check your Articles, pre-emption rights, and approval requirements before issuing shares, and keep your statutory registers and Companies House filings up to date.
• If shares are being issued to employees/directors at a discount, tax, valuation, and reporting can become a real issue - it’s worth getting specialist advice before you proceed (Sprintlaw can help with the legal documents, but doesn’t provide tax or accounting advice).

If you’d like help issuing shares, setting up the right documents, or sanity-checking how to choose a value for each share in your company, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.