17 February, 2016
Many Companies ordinarily have one class of share in issue however for SMEs the use of alphabet share structures can be both useful and efficient in a number of ways.
Alphabet shares are shares of different classes, which are often named as 'A' Shares, 'B' Shares and so on. Each different class of share can have different rights attached which are set out in the Company's articles of association.
Many SMEs find the use of such structures useful for remuneration and dividend planning as well as awarding shares to those who they wish to have reduced or no voting power.
They are often useful in family run Companies where certain shareholders are to be given more wide ranging powers, for example in a family run company the founding shareholder and his partner may wish to have the right to appoint a director, whereas the younger generation may be awarded shares for the purpose of spreading income amongst the family and capital tax planning but not have the right to vote or appoint a director if they are not to be involved in the day to day running of the Company.
Similarly in a Joint Venture Company if one party is bringing more to the table or is financing the Company then that party may wish to have weighted voting rights and the right to veto certain actions above other shareholders. Different share classes can be created in the articles and a Shareholders Agreement implemented to provide different rights for each party.
A company may wish to award dividends to shareholders that are not in proportion to their shareholdings. If an alphabet share structure is adopted and each shareholder is awarded a separate class of shares then different levels and rates of dividend can be declared on each separate class of shares at different times provided that the Company's articles of association are appropriately tailored and provide the express right for the different levels of dividend to be declared.
Alphabet share structures are also useful where a Company wishes to award shares to employees as an incentive to playing a part in the growth or boosting of the Company's profit. It is desirable for these shares to be non-voting and redeemable at nominal value if the employee is to leave the engagement of the Company and so alphabet share classes can be created to provide for these differentiated rights.
In order to create a new class of shares the Company will need to set out the classes and class rights in its articles of association and adopt the amended articles by special resolution. The share classes will then need to be allotted or converted and considered and approved by the directors and shareholders of the Company.
At Forbes our specialist team of Corporate Solicitors can assist you in restructuring your Company's share capital so as to better suit your needs. We are also able to undertake the restructuring work on a fixed fee basis so that you are aware of the associated costs from the outset.
If you have any questions about corporate restructures and alphabet shareholdings or require assistance with any other corporate matters then please do not hesitate to contact Jenny Burke.
06 Dec 2017
Leading law firm Forbes Solicitors has enhanced its work in the pensions sector
Very thorough and precise with each contract and have made it very easy for us to feel very confident going into new territories, whether it being a different country or a different manufacturer.
Forbes was instrumental in ensuring Electric Coffee Co is able to meet its growth ambitions.
Electric Coffee Co
It is always a pleasure to deal with true professionals and specialists in their area and this is what you can expect when dealing with Forbes and, in our case, specifically Nick and Gemma.
Gareth & Janet Watson
The team not only provides professional and practical advice, but also takes a personal interest to understand the business and the matter at hand.
Leonard Curtis Business Solutions Group
The advice and service that we receive from Pauline and her colleagues is consistently professional, knowledgeable and efficient. They have a great ethos and are a pleasure to work with.
Focus Insolvency Group
What a pleasure to do business with Forbes - Pauline Rigby & Nick Pickup both understood my personal objectives and requirements
Former Business Owner
I would like to thank Jayne and the Business Law team for being so friendly, professional and patient throughout the sale.
We have been very happy with the professional service from Pauline Rigby and her colleagues in the Business Law team and the ease of purchasing our new business
Andrew M Jones
Internet Trading Ltd
I and the UCLan team wanted to acknowledge the support from your team, including Nick Pickup and Pauline Rigby. Their contribution has been much appreciated by both clients and our staff.
Head of Innovation and Enterprise
Sincere thanks for all the time, patience and professionalism from Pauline and Tricia in the completion of MAP12 contract terms and conditions.
Jayne & Anthony Mellor
It's a One Stop Shop as a legal entity, whatever problem we've got you've got someone to come and advise us or fix it
The Northcote Group
We have always found Forbes to be approachable and helpful and we look forward to a continuing professional relationship
Child Action Northwest
I have been extremely pleased with the legal team at Forbes and all their help
South Lakes Veterinary Centre
The team at Forbes have been professional, thorough, friendly and efficient from day one through to completion. We will certainly be using them again as we look to move our business forward.
S & L Wilson