A Guide to Different Types of Company Shares
When you set up a business and register it with Companies House, you need to think about the shares that you are going to distribute. For the majority of businesses, it is just going to be Ordinary Shares that are sent out, but it makes sense that you fully understand the different options that are available to you in case you need to change this further down the line.
First of all, we have ordinary shares, which do not carry any special rights or restrictions, and may even have a different nominal value. Usually, it is the case that every shareholder is entitled to a vote, though this is obviously different if the nominal value of the shares starts to vary. There are also a couple of subcategories that are found within the ordinary share umbrella term. Deferred ordinary shares do not pay a dividend until all other classes have received one. You also have non-voting ordinary shares, which restrict the right to vote in certain ways. Perhaps until particular criteria have been met, in other ways, they rank the same as ordinary shares.
As is suggested in the name, redeemable shares can be bought back by the company. This option may come up at a certain date or between two dates. Often, the redemption price is the same as the issue price, but this may be set up to be different in certain situations. If you are looking for flexibility with your shares, this might be the best option for you.
Next up on the list of different share options, we have preference shares. Essentially, these ones entitle the holder to preferential treatment in that a fixed amount of dividend should be received each and every year, which is different to ordinary shares. Usually, preference shares exist in a non-voting capacity. There are also cumulative preference shares that entitle the holder to the full dividend at a later date if it is not met. As well as this, there are also redeemable preference shares, which combine the features of redeemable and preference shares.
How to Issue Shares
Now that you know about all the different shares that you are able to issue, you also need to know how you can actually distribute these in the first place. Initially, this means that all members of the board sit and agree to the issuing of shares at a board meeting. You will then need to complete an allotment of shares form. You will also need to complete a board resolution, as well as meeting minutes and share certificates. The new issue of share information will need to be included in the company's confirmation statement. Finally, you will need to report the changes to Companies House within a month of the change being made.
There you have a guide to all of the different types of company shares out there, as well as the ways in which they can be issued. Now you know much more about this important business practice and how you can use it yourself.