How are company shares divided?

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I’ve got a question relating to company shares that I’m hoping somebody can help me with. My name is Hayden, and I’m setting up a limited company between three shareholders. Now, while these guys are business partners and friends, I’m going to be company director and I will be the one really driving the business. Bearing that in mind, we all agree that I should have more ownership in the company than they do. None of us are sure how shares are divided, though. Are there any rules relating to how shares are usually divided amongst shareholders, or can this be done in any way you’d like?

Answers

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It is up to the founding shareholders how many shares are issued and how they are divided between each person. As long as you issue at least one company share per shareholder, you can issue any number you like - you can even issue just one share if the company has only one shareholder.

If you want to own more of the company and have more control that other shareholders in the company, you must retain at least 51% of the issued shares. You’ve stated that you will be setting up the business with two of your friends, so there will be three shareholders in total - here are a few examples of how you could divide the company up:

  • Issue 5 shares - keep 3 for yourself, give 1 to each of your friends. You will own 60% of the company; they will own 20% each.
  • Issue 10 shares - keep 8 for yourself, give one to each of your friends. You will own 80% of the company; they will own 10% each.
  • Issue 100 shares - keep 70 for yourself, give 15 to each of your friends. You will own 70%; they will own 15% each.

When choosing the best number of shares to issue, it is important to remember that each share has a nominal value (usually £1) which represents the liability of the shareholders. So, the more shares you issue, the greater your personal liability to the company if it runs out of money.

a year ago
 

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