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Why have multiple classes of shares?

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Successful Businessman With A Contract In Hand

Businesses tend to start off just having ordinary shares with full voting and dividend rights, however, there are lots of good reasons why you might create multiple share classes:

 

1. To reward the owners based on their contribution – for example say one owner worked full time and the other only part time – they may want dividends to be based on their efforts whilst still retaining their original voting rights

 

2. To offer non voting shares to employees

 

3. Convertable or Redeemable shares might be offered to an investor

 

4. Preference Shares might have a fixed dividend

 

Dividends are very tax efficient so its great way to reward the owners for the risk of running a business.

 

Always seek professional advice before making changes to check for capital gains, settlement and other tax and legal issues, better safe than sorry.

Then before creating additional share classes check your articles of association and change them if necessary, then you will need a resolution to create new share classes, fill the appropriate forms at Companies House and then you are ready to go.

 

 

steve@bicknells.net


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