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 necessary for a company to have two or more distinct groups of equities in existence at any one time by creating additional classes of shares.
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For example, a company could have a share capital structure as follows:
Authorised shares
|
| Class of share |
nominal Value £ |
Number |
Totals |
| Ordinary A |
1.00 |
1,000 |
1,000 |
| Ordinary B |
0.50 |
2,000 |
1,000 |
| Ordinary C |
0.10 |
1,500 |
150 |
| Totals |
|
4,500 |
2,150 |
Issued shares
|
| Class of share |
nominal Value £ |
Number |
Totals |
| Ordinary A |
1.00 |
500 |
500 |
| Ordinary B |
0.50 |
1750 |
875 |
| Ordinary C |
0.10 |
400 |
40 |
| Totals |
|
2650 |
1,415 |
In the example above, it can be seen that the three multiple classes of share operate independently of each other. The amounts for both authorised and issued shares for each class are different.
There is no requirement to issue shares from the different classes at the same time or in the same proportions.
Shareholders can hold more than one class of share in the same company and benefit from the rights which pertain to the multiple groups.
Reasons for Having More Than One Class of Share
It is implied (but not required) that a company with several classes of share has allocated different rights or privileges to the different groups. There would be little point in having more than one type of share if this were not true, as it would be simpler to administer increased numbers of the same group than account for several groups and their and owners..
The individual rights relating to each class of share could potentially differ in one or more of the following ways:
- Their voting rights
- Whether they can receive dividends
- Guaranteed or variable dividend
- Payouts received on winding up
There is no statutory limit which restricts the number of groups which a company can create provided the correct procedures are followed. These procedures include the necessary company resolutions and board minutes authorising the issue of additional classes of shares.
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 share. In the above example, if class B 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 C shares owned by the individual assuming that these shares contained voting rights.
If all three types of share were eligible to receive dividends, a calculation on the amount of a given dividend the same individual would receive, would have to include classes A, B and C.
