Share capital, class rights and the impact of a new share scheme

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • Share capital, class rights and the impact of a new share scheme
  • Background
  • What is a share and share capital?
  • Classes of shares and class rights
  • General issues when setting up new share incentive schemes
  • Directors’ authority to allot shares
  • Shareholder rights
  • Variation of class rights
  • Meaning of 'variation'
  • Introduction of an employees’ share scheme

Share capital, class rights and the impact of a new share scheme

Background

Companies incorporated under the Companies Act 2006 (CA 2006) are either established on a limited or unlimited basis. This means that the liability of the members of the company is either limited or unlimited by its constitution. If the company is limited (whether private or public), it can either be limited by shares or limited by guarantee. In the case of a public company limited by guarantee it must also have a share capital.

Regardless of whether a company is public or private, if it is limited by shares, the liability of its members is limited to the amount, if any, unpaid on their shares. If it is limited by guarantee, the liability of its members is limited to the amount of their guarantee.

What is a share and share capital?

The generally accepted commercial meaning of share capital is the funds of a company raised by the issue of shares (whether on incorporation or subsequently) in return for cash or other permitted forms of consideration. The share capital comprises part of the equity of a company shown on its balance sheet.

A ‘share’ in relation to a company essentially means a share in the company's share capital.

Shares in a limited company having a share capital must each have a fixed nominal value, which may be denominated

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