About shares

Most companies have shares.  The shareholders, who have provided the necessary capital, are the owners of the company.  In return for their investment, they receive a 'share' of the company.

The only companies which do not have shares are companies limited by guarantee.

Classes of share

It is usual for companies to have just one class of shares, known as ordinary shares, though they can have other classes of shares as well.

When there are only ordinary shares, all shareholders have

If there are other classes of shares, the rights, privileges and restrictions relating to each class must be set out in the company’s articles of association.

Issue of shares

Individuals agreeing to take shares in a company at the time it is incorporated should sign Form 3.  The person presenting the application to the Registrar will also sign the articles of incorporation on behalf of all the intended members.  While details of shareholders must be provided to the Registrar, this information is not made public.

Shares will normally be issued following the first directors’ meeting, but not until full payment has been received.  The directors will then issue a share certificate to each shareholder.

The articles, by-laws or shareholder agreement may authorise the directors to issue further shares.

Restrictions on right of transfer

The articles of a private company will often include a restriction on the transfer of shares.  This may for instance state that no member shall transfer his or her shares to another person without the consent of the other members. 

A restriction on transfer is essential if the company is to qualify as a ‘specified private company’ so as to take advantage of the financial reporting and other exemptions available to such a company.  To qualify, the company must also restrict the number of members to a maximum of 11, excluding present and former employees.

If there is a restriction on the transfer of shares, this must be stated on the share certificate.  

No private company may offer its shares to the public.

 

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