What Is a Share Class?
A share class defines a group of shares that carry the same rights and conditions. Different classes allow a company to differentiate:
- Voting rights
- Dividend entitlement
- Rights on liquidation
- Ability to transfer or redeem shares
This flexibility is useful when balancing founder control, investor participation, employee incentives, or family ownership.
Common Share Classes in UK Private Companies
Here are the most frequently used share classes:
- Ordinary Shares – standard shares with full voting, dividend, and capital rights.
- A/B/C Shares – subclasses of ordinary shares with varied rights, often used to separate founders, investors, or employees.
- Non-Voting Shares – carry dividend rights but no voting power.
- Preference Shares – offer a fixed dividend and priority return of capital, usually with limited or no voting rights.
- Redeemable Shares – can be bought back by the company at a future date, under agreed terms.
- Growth Shares – allow shareholders to benefit from future growth only, often used for incentivising employees.
Dragonfly Associates assists in drafting Articles of Association or Shareholder Agreements to reflect these distinctions where required.
Why Use Different Share Classes?
Companies create multiple share classes to:
- Attract investment without diluting control
- Reward employees with equity but limit voting rights
- Distinguish founder shares from passive investor shares
- Facilitate dividend payments based on performance or agreement
- Plan for future exits or share buybacks
We help businesses structure their share capital in line with their goals, subject to agreement and proper legal review.
Legal Considerations
When creating or altering share classes, you must:
- Update your Articles of Association (if rights differ from default)
- Pass a shareholder resolution approving the changes
- Issue appropriate share certificates
- File relevant forms with Companies House (e.g. SH01 for allotments, SH08 for changes to rights)
Dragonfly Associates prepares these documents and ensures compliance through our secretarial services, where applicable.
Tax and Investment Implications
Share classes can affect:
- Eligibility for SEIS/EIS tax reliefs
- Director and employee tax treatment
- Control thresholds for decision-making
- Valuation for fundraising or sale
We recommend reviewing share structuring with your accountant or tax advisor. We work alongside your advisers to document the structure correctly.
Frequently Asked Questions
Can I issue different share classes after incorporation?
Yes. You can amend your share structure at any time by passing a resolution and updating Companies House.
Do different share classes affect Company House filings?
Yes. You must declare the class of each share and its rights in your Confirmation Statement and statutory filings.
Can employees receive shares with limited rights?
Yes. Many companies issue non-voting or growth shares to staff, especially in startup environments. We help draft the appropriate terms.
Build the Right Capital Structure from the Start
Whether you’re onboarding investors, launching an employee incentive plan, or simply planning for the future, share classes give you flexibility without compromising control—if structured properly.
Dragonfly Associates helps you define, issue, and document share classes in accordance with UK company law—available under clearly defined service agreements.
To explore or update your company’s share structure, contact our team today.
