Why Having Different Share Classes Can Benefit Your Company
Tuesday, 29th July 2025As businesses grow and ownership structures evolve, more companies are turning to different share classes to safeguard control and ensure long-term stability. This approach allows founders to tailor rights and benefits, helping preserve their vision while attracting the right kind of investment for future growth.
Why Your Company Could Benefit from Different Share Classes
Most companies start with a single type of ordinary shares. This very basic structure is often all that is required at the early stages of a company. However, as a company begins to expand, shareholder needs will change. Adding different share classes can provide flexibility and align shareholder rights with the business objectives.
What is a Share Class?
A share class is a type of share with associated rights. The rights are usually outlined in the company’s articles of association and can relate to:
- Voting rights
- Dividend Entitlement
- Rights regarding a sale or winding up
- Transfer restrictions
Share classes allow a company to structure how it separates control, income sharing and succession.
Why Are Different Share Classes Useful?
Having different types of share classes allows companies to better meet the needs of shareholders. For example shareholders may want regular dividends, some may want capital growth over the long term, and others may want a stake in the company without any decision-making involved.
This can be particularly useful when:
- Founders wish to retain control while issuing non-voting shares to others
- Family succession is being planned, allowing value to pass to the next generation over time
- Key employees are incentivised with growth shares that reward them on a future sale
- External investors seek preference shares with priority return
- Minority shareholders require protections over major decisions
Implementing a New Share Structure
To implement new share classes, companies must pass the appropriate shareholder resolutions, amend the articles of association, and submit the correct forms and an updated statement of capital to Companies House. Where relevant, the shareholders’ agreement should also be reviewed to reflect the revised structure and protect the interests of all parties.
How Forbes Solicitors Can Help
We work with clients and their professional advisers to implement share structures that meet their objectives. Our team assists with:
- Drafting revised articles of association
- Preparing board minutes and shareholder resolutions
- Handling Companies House filings
- Updating or drafting shareholders’ agreements if required
If you are considering new share classes or restructuring your company’s existing share capital, we would be happy to support you through the process. Please get in touch for further guidance.
For further information please contact Nick Dawson