About
shares
Most companies
have shares. The shareholders, who have provided the necessary capital,
are the owners of the company. In return for their investment, they
receive a 'share' of the company.
The only
companies which do not have shares are companies limited by guarantee.
Classes of share
It is usual for companies to
have just one class of shares, known as ordinary shares, though they can have
other classes of shares as well.
When there are only ordinary shares, all shareholders have
-
the
right to vote at any meeting of shareholders
-
the
right to receive any dividend declared by the company
-
the
right to receive the remaining property of the company on its dissolution
If there are other classes of shares, the rights, privileges and restrictions
relating to each class must be set out in the company’s articles of
association.
Issue of shares
Individuals agreeing to take
shares in a company at the time it is incorporated should sign Form 3. The
person presenting the application to the Registrar will also sign the articles
of incorporation on behalf of all the intended members. While details of
shareholders must be provided to the Registrar, this information is not made
public.
Shares will normally be issued following the first directors’ meeting, but not
until full payment has been received. The directors will then issue a
share certificate to each shareholder.
The articles, by-laws or shareholder agreement may authorise the directors to
issue further shares.
Restrictions on right of
transfer
The articles of a
private company will often include a restriction on the transfer of shares.
This may for instance state that no member shall transfer his or her shares to
another person without the consent of the other members.
A restriction on transfer is essential if the company is to qualify as a
‘specified private company’ so as to take advantage of the financial
reporting and other exemptions available to such a company. To qualify,
the company must also restrict the number of members to a maximum of 11,
excluding present and former employees.
If
there is a restriction on the transfer of shares, this must be stated on the
share certificate.
No private
company may offer its shares to the public.
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