Frequently Asked Questions

UK: What class of shares should my UK company have? How many shares should my UK company have?

The number and class of shares should be considered on a case-by-case basis and set according to the specific needs and objectives of the company. UK companies must have at least one share in issue from incorporation. Whilst a single share may be appropriate for a wholly owned subsidiary (e.g. 1 share of £1.00), a company that will be issuing shares to founders, investors and employees (via an option pool) (i.e. a venture-backed business) should have a larger number of shares with a relatively low nominal value (e.g. 1,000,000 shares of £0.000001). The advantages of the latter approach include greater flexibility in issuing more accurate numbers of shares relative to percentage shareholdings and a lower nominal value in terms of the exercise price on option grants. If a company is incorporated with a small number of shares, the share capital can be sub-divided to achieve the desire position (which is often done in connection with early financing rounds). 

Whilst you can have multiple share classes with different names and denominations, most companies incorporate with a single class of ordinary shares. These shares will be most appropriate for initial subscriptions to founders and subsequently any incoming angel investors who may expect to receive certain tax reliefs on their shares (such as Seed Enterprise Investment Relief or Enterprise Investment Relief). It is also the most common class for the employee share option pool. Once the company is raising venture capital, particularly from experienced or institutional investors, the expectation will be for a preferred class of shares (with preferential rights to the ordinary share class) to be issued. 

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