Shares and Share Capital can be a confusing topic when setting up a company for the first time.
A company’s share capital is the fund to which a company’s shareholders contribute in cash or in kind in return for their shares in the company.
When setting up a Company, the share capital requirements may be influenced by the company type, the activities of the company and the shareholders investing in the company.
Shares and share capital section is not applicable to Companies Limited by Guarantee (CLG) or a Public Unlimited Company (PULC) without a Share Capital. They will have members instead of shareholders.
The standard rights attached to Ordinary Shares are:-
- The right to receive notice, information, attend and vote at general meetings
- A right to participate in the profits of the company by way of a dividend
- A right to participate in the surplus assets of the company in the event of the company being wound up
The subscribers are the first shareholders or members of the company. A shareholder is a member of the company.
The authorised share capital section is optional for LTDs however most LTD companies do not have to have an authorised share capital.
If the company is required or chooses to have an authorised share capital, this figure is the maximum amount of share capital the company may issue. This is generally either €1,000,000 or €100,000. The company does not have to issue all these shares.
The issued share capital is the number of shares being issued to the subscribers (first shareholders) of the company. The number of shares issued can be as little as 1 or as large as 1,000 or more. Whatever amount of shares issued that shareholder must pay that amount to the company. E.g. 100 shares @€1 each the shareholder will have to pay €100 to the company.
One vote is attached to each share held in the company and therefore it is very important to ensure that the correct amount of shares are issued to each subscriber.
Shares issued can be of any class, but the most common type of share issued is Ordinary Shares. If the Company wants to have different rights attached to shares then separate share classes may be created and the constitution should set out the different rights.
The nominal amount per share is the cost of each share which is usually €1. Shares may also be issued at a premium which is an amount greater than the nominal value of the shares.
Shareholder Agreement
Every company should consider putting a shareholders’ agreement in place. The shareholders’ agreement is a basic contract setting out the rights and obligations of the shareholders that is more specific than the basic rights in the company constitution or company law. Click here for more information
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