Dividing share classes with different voting rights

[00matt]

Hi,

I'm looking to start a private company limited by shares with my two co-founders. We have agreed to split the shares 40/30/30 in favour of myself. I would like to set up the company so that I have the controlling vote - having googled for hours, I've registered here to get some advice...

I've heard of management and alphabet shares but i'm not sure which is best (if any) and how to go about setting them up. Many websites talk about amending the articles of association, but having looked at the model articles on companies house, it doesn't state any particular class of shares and what their rights are. In addition, IN01 statement of capital asks to define the class of shares and the rights (prescribed particulars) attached to them, which contradicts the need to update the articles of association? Would it be possible to define two classes of shares, Ordinary A with voting rights and Ordinary B with no voting rights, without the need to update articles of association?

Thanks in advance,
Matt

 

[Scalloway]

The Articles are the governing document of the company. The statement of capital is the document that informs Companies House what you have actually issued and assumes you have done so according to the Articles.

 

[Taurus.C]

Hi there,

There are a number of procedural steps will need to be followed in order to create different share classes. Apart from creating the share classes on the company register with the Companies House, the following things will need to be done to complete the full legal formality:

(1) Amend company article to effect the changes, as the company article is the rules governing the company internal management and create a binding contact between the company and members of the company therefore it is important to state all company related matter as part of the company article of association.

(2) Company ordinary/special resolution - it is required by Companies Act 2006 to record on any changes of the company and have the copy of company resolution to be drafted and kept at registered office. The authority may require to the company director to provide the company minute to show that a resolution has been passed to allow the creation of different share classes.

To thrive, it is important to amend the company article of association for the creation of different share classes because it eases the potential legal dispute in the future due to lack of legal formality which may render the creation of different share classes void. (this is typical when other shareholders find the proportion of share value or control within the company unfair)

Should you require any further assistance please feel free to let me know.

Kind regards,
Taurus Cheung
Corporate Legal consultant

Archers Corporate Services Limited