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Different Classes of Shares

 

Multiple Classes of Shares and UK Limited Companies

Whilst most UK limited companies usually have just one class of share, it is possible and often desirable for a company to have two or more distinct groups of equities in existence at any one time by creating additional classes of shares.

Complete Formations provide an easy to use facility for creating multiple classes of shares when registering a UK company. The feature can be added to the shopping basket as you proceed through the incorporation system for just £19.99.

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Reasons for Having More Than One Class of Share

It is implied (but not required) that a company with several classes of shares has allocated some variation in rights or other privileges to the different groups of equity. There would be very little point in having more than one type of share if each different class had exactly the same characteristics. In such as case, it would be far simpler to administer just a single class of share and make further allotments of the same group as and when necessary.

The individual rights relating to different share classes could potentially differ in one or more of the following ways:

  • The voting rights attached to them
  • Whether or not they can receive dividends
  • Guaranteed or variable dividend
  • Payouts received on the winding up of the company

There is no statutory limit which restricts the number of classes or groups of shares a company can create provided the correct procedures are followed. Further to the Companies Act 2006, this will typically entail the completion of Form SH01 and the resultant updates to the statement of capital. Internally, procedures might include the necessary company resolutions and board minutes authorising the issue of additional classes of shares and the rights attached to them.

Example of Different Types of Shares

A UK limited company could have a share capital structure as follows:

Class of share Nominal Value £ Number Totals Voting Rights Rights to Dividends
Ordinary A 1.00 500 500 One share equals one vote Equal rights to dividends
Ordinary B 0.50 1750 875 One share equals one vote No rights to dividends
Ordinary C 0.10 400 40 No voting rights Equal rights to dividends
Totals   2650 1,415    

In the example above, it can be seen that the three different classes of share essentially operate independently of each other in terms of how many units have been issued and the rights which are attached.

An individual Shareholder can hold more than one class of share in the same company and benefit from the rights which pertain to the multiple groups. For example, person A can hold 250 Ordinary Class A and at the same time own 1000 Ordinary Class B shares. They would possess 1250 of the available 2250 voting rights and be eligible to receive 250/900 of the dividends payable.

Calculating Holdings within a Company with Different Classes of Share.

When determining the total holding which an individual shareholder has in a particular limited company, it is necessary to look at the rights afforded to the different classes of shares. In the above example, where the Class C shares were non voting then when calculating voting rights they would be removed from the calculation. The equation would then focus solely on the percentage of Class A and B shares owned by the individual on the basis that these are the only types which carry voting rights.

Taking the above example, the entitlements to dividends would negate the Class B shares and the calculation of how much an individual is due would focus solely of their holdings of the Ordinary Class A and C types of equity.

 
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