Why have multiple classes of shares? Reply

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.

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 are ready to go.

If you have any questions please feel free to contact me.

steve@bicknells.net