Dividend options and multiple share classes for your employees

Are you thinking about paying dividends to shareholders? You might also be considering how to pay different types of dividends to your employees or family members compared to your own dividends. This can be achieved by creating different classes of shares for different types of shareholders. We can draft these for you in your company articles of association.

Company Formations 24.7 have received a number of enquiries on this subject and our experienced company secretarial team are ready to support you in implementing any changes required to your company documents to ensure you can pay dividends to your employees or family members before the start of the new financial year.

Multiple share classes

Most standard articles of association offer one share class to shareholders. Voting rights are all equal and dividends paid out are in proportion to the shares held.

However, as a business owner you may want to pay your employees or family members dividends to reward them as your company grows and evolves. To achieve this your articles of association will need to contain the correct provisions which allow multiple share classes, with the most common form being alphabet shares.

Alphabet shares and why use them

Alphabet shares, allows us to allocate shares with different classes to your employees or family members. We will label each share class using a specific letter e.g. “A”, “B”, “C” etc. Companies with alphabet shares can give different rights to different shareholders and pay different amounts of dividends.

For example, we can allocate your employee’s with ‘A’ shares which will entitle them to a small yearly dividend based on profit.

You can then allocate family members ‘b’ shares which have bigger dividend rights. They might also be able to vote on important company decisions, such as appointing a director.

You should be aware that if your company’s articles of association don’t identify the rights attached to each class of share, then they will be ranked equally.

How to set up alphabet shares

A company’s articles of association will need to be amended to allow alphabet shares to be implemented. You will first need a special shareholders’ resolution which will permit a change in your articles of association. We can then create the new share class in your articles with the bespoke rights.

Why use our company secretarial services

Company Formations 24.7 company secretarial team can help amend and redraft your company articles of association.

With a wealth of experience spanning over 40 years and working with not only accounting firms but law firms.  You can rely on our expertise and competitive pricing to provide you with quality company secretarial service.

If you have any questions about paying dividends to shareholders please contact our qualified company secretarial team. A member of our talented team will be on hand to guarantee you have all the support you require to satisfy your needs.

Contact our secretarial team now on 0207 554 2261 or email our team here.