Please explain share classes in a company

[DSLiverpool]

Please explain as if to an idiot about classification of shares and that some do x and others do y. I am not quite understanding it.

[akirk]

- shares carry rights with them
- rights are specified in places such as articles / memo of assoc. / external agreements etc.
- different share classes can have different rights attached

if you want to get creative you can attach virtually any right you wish which is legal (right to use the restaurant on floor 1, but not on floor 2 of HQ etc. )

often used to split how you pay share holders a dividend as you can pay different levels of dividends to different classes (but have to pay the same level to all within one class) so if you have 2 shareholders with 50 shares each both ORD shares (normal, no class specified shares) then paying out a dividend of £1,000 would be £10 per share and therefore £500 to each. If shareholder 1 has e.g. ORDs and shareholder 2 has A ORDs (different class) still both have 50, then you could pay £1 each share to the ORDs and £19 each to the A ORDS and split the dividend £50 / £950 etc. by keeping voting rights the same you can have the same level of control but take different amounts out of the company...

classes are also used by investors to give them priority etc...

basically if you want shareholders to have identical rights - use one class only - if you want different rights - two classes or more are needed...

[DSLiverpool]

akirk said:

- shares carry rights with them
- rights are specified in places such as articles / memo of assoc. / external agreements etc.
- different share classes can have different rights attached

if you want to get creative you can attach virtually any right you wish which is legal (right to use the restaurant on floor 1, but not on floor 2 of HQ etc. )

often used to split how you pay share holders a dividend as you can pay different levels of dividends to different classes (but have to pay the same level to all within one class) so if you have 2 shareholders with 50 shares each both ORD shares (normal, no class specified shares) then paying out a dividend of £1,000 would be £10 per share and therefore £500 to each. If shareholder 1 has e.g. ORDs and shareholder 2 has A ORDs (different class) still both have 50, then you could pay £1 each share to the ORDs and £19 each to the A ORDS and split the dividend £50 / £950 etc. by keeping voting rights the same you can have the same level of control but take different amounts out of the company...

classes are also used by investors to give them priority etc...

basically if you want shareholders to have identical rights - use one class only - if you want different rights - two classes or more are needed...

Thanks for that I understand ... so we have all the same right now but if a larger investment was required we could change the share type.
Question - can you own 2 different share classes of the same company ie 25% A Ords and 10% Ords ?

[akirk]

DSLiverpool said:

akirk said:

- shares carry rights with them
- rights are specified in places such as articles / memo of assoc. / external agreements etc.
- different share classes can have different rights attached

if you want to get creative you can attach virtually any right you wish which is legal (right to use the restaurant on floor 1, but not on floor 2 of HQ etc. )

often used to split how you pay share holders a dividend as you can pay different levels of dividends to different classes (but have to pay the same level to all within one class) so if you have 2 shareholders with 50 shares each both ORD shares (normal, no class specified shares) then paying out a dividend of £1,000 would be £10 per share and therefore £500 to each. If shareholder 1 has e.g. ORDs and shareholder 2 has A ORDs (different class) still both have 50, then you could pay £1 each share to the ORDs and £19 each to the A ORDS and split the dividend £50 / £950 etc. by keeping voting rights the same you can have the same level of control but take different amounts out of the company...

classes are also used by investors to give them priority etc...

basically if you want shareholders to have identical rights - use one class only - if you want different rights - two classes or more are needed...

Thanks for that I understand ... so we have all the same right now but if a larger investment was required we could change the share type.
Question - can you own 2 different share classes of the same company ie 25% A Ords and 10% Ords ?

yes
and yes quite normal in smaller businesses though you never own a percentage you own actual shares (prob. teaching you to suck eggs there!) % is simply a reflection of the shares owned v. issued...

worth noting that certain % of shares by default carry certain rights - you would need to check at the point of an investment which rights can be subsequently contracted out or which remain:

http://www.shareholderrights.co.uk/RightsOfAShareH...
is a really good overview of these...

25% is one of the key thresholds as if your holding is below that the majority can put in place special motions and in effect overturn any agreement you have (e.g. dilute you further) - so 25% allows you to maintain the status quo - above that various other thresholds give other powers...

basic tip though is to keep it as simple as possible