Holding shares confers ownership, rights, and responsibilities within a private company limited by shares or a public limited company. Understanding the types of shares and how different share classes work is key for entrepreneurs, founders, investors, and anyone planning to start and run a limited company in the UK or invest in a public entity. In this article, we will explain all you need to know about company shares in the UK.
- Company shares represent units of ownership, granting rights and responsibilities to shareholders in the UK.
- Different share classes can be issued, each with unique rights, affecting voting and profit distributions.
- Ordinary shares provide full voting, dividend, and capital rights, typically favoured by founders and long-term investors.
- Preference shares offer fixed dividends and priority in liquidation, appealing to risk-averse investors.
- Maintaining accurate records of company shares is a legal requirement, ensuring transparency and compliance.
Company shares are units of ownership in a UK limited company or public limited company. That unit may be anything from 100% to a tiny fraction. For example, Nvidia, the world’s largest company by market capitalisation, has issued approximately 24.4 billion shares.
Those who own shares in a private company limited by shares or a public company are called ‘shareholders’ or ‘members’. A company can have one or more shareholders.
Typically, holding shares in a company gives shareholders:
- Voting rights – the ability to vote at general meetings.
- Dividend rights – entitlement to a share of company profits.
- Capital rights – a claim on assets if the company winds up.
From a legal perspective, shares are considered a form of property. They can be transferred, sold, inherited, or otherwise disposed of, subject to the company’s constitution and statutory restrictions. Shareholders of UK companies have specific rights and obligations. Shareholders may have the right to:
- Attend and vote at general meetings
- Receive company information, and
- Share in company profits through dividends.
UK companies can issue different types (or classes) of shares, each with its own distinct rights. The most common types of shares include:
- Ordinary shares
- Preference shares
- Redeemable shares
- Non-voting shares
- Alphabet shares
| Share Class | Main Features |
|---|---|
|
Ordinary |
Voting, dividends, and capital rights |
|
Preference |
Fixed dividend, priority on returns |
|
Redeemable |
Can be bought back by the company |
|
Non-voting |
No votes, but may receive dividends |
|
Alphabet |
Flexible rights, often labelled A, B, C |
A share class groups shares with the same rights. Some companies use multiple share classes to manage control and rewards. For example, one class may carry full voting rights while another prioritises dividends. With that said, most smaller companies simply use ordinary shares across the board.
Share classes are used to:
- Determine who controls voting power
- Determine how profits from the company are distributed
- Control succession and inheritance planning, and
- Create employee incentive schemes.
Most UK companies issue ordinary shares as their main share class. They usually provide full rights across voting, dividends, and capital. Ordinary shares usually carry full rights, meaning holders can vote at general meetings, receive dividends when declared, and share in any surplus capital if the company is wound up. Because they combine voting, profit, and capital rights, ordinary shares are used by most private limited companies.
Ordinary shares are typically issued to company founders, directors, family members, or early investors. Unlike preference shares, ordinary shares do not guarantee fixed dividends, so the level of return depends on the company’s performance and decisions made by the board. This flexibility makes them attractive for growth-focused businesses but less predictable for investors seeking steady income.
Key features of ordinary shares:
- Voting rights on company decisions
- Entitlement to dividends
- Potential for capital growth returns if the company succeeds
- Share in the company’s residual value on liquidation (last in priority)
- Suitable for founders, employees, and long-term investors
- Greater risk but higher reward potential compared to preference shares
Preference shares in the UK are a special class of company shares that provide shareholders with priority dividend payments and preferential entitlement to capital if the company is liquidated. Holders of preference shares tend to be paid a fixed dividend before ordinary shareholders receive any payments, which offers greater security but may mean they do not benefit from higher profits in especially successful years.
Another key feature is that preference shares usually carry limited or no voting rights, giving investors income and capital protection rather than company control. In practice, these shares are popular with risk-averse investors or those seeking predictable returns.
Key features of preference shares:
- Priority dividend payments
- Fixed dividend rate
- Preference in company liquidation
- Attract risk-averse investors
Redeemable shares in the UK are a class of shares that a limited company has the option to ‘buy back’ from shareholders at a pre-agreed time or under specified conditions, such as a set date, event, or at the discretion of the company or shareholder. This flexibility benefits companies seeking short-term funding solutions and investors looking for a set exit strategy.
Key features of redeemable shares:
- Provides a clear exit strategy for company investors
- Can be bought back by the company at predetermined terms
- Helps avoid permanent dilution of control, which may be preferred for existing shareholders
- Useful in employee incentive schemes
- Allows phased ownership transitions
- Increased investor confidence
Non-voting shares in the UK do not grant holders any voting rights in a company’s general meetings or decision-making processes. Non-voting shareholders benefit from dividends and a potential share in surplus capital, but they cannot influence changes to the company, such as appointing directors, amending articles, or approving major transactions.
Companies tend to issue non-voting shares to employees or family members of principal shareholders, allowing them to participate in the company’s financial success without affecting control or governance. This share class is especially useful for raising capital or incentivising staff, while the main shareholders retain all strategic decision-making powers.
Key features of non-voting shares:
- Receive dividends like ordinary shares
- No voting rights, so no control over company decisions
- Useful for family members or employees
- Can be used to incentivise staff without diluting voting power
Alphabet shares in the UK represent different classes of ordinary shares and tend to be labelled as ‘A’, ‘B’, ‘C’ and so on. Alphabet shares allow companies to grant varying rights to different shareholders within the same company. These variations can include differences in voting power, dividend entitlements, or rights to capital. This flexibility helps businesses structure ownership to suit founders, investors, and family members while maintaining control and meeting diverse investment goals.
Companies typically use alphabet shares to customise rights for shareholders, such as giving founders stronger voting control or prioritising dividend payments to certain shareholders. These share classes must be clearly defined in a company’s articles of association and shareholders’ agreements to avoid disputes and ensure legal compliance.
Key features of alphabet shares:
- Gives flexibility in dividend payments
- Different voting rights per class
- Retain control with key shareholders
- Potentially tax-efficient
- Customised shareholder privileges
- Useful for family businesses
- Can be used for employee incentives
When issuing or transferring new company shares, it is important to follow the correct process to ensure legality, fairness and transparency. The first step is to check your company’s articles of association. This will set out the process for the issuing and transferring of shares and should be followed to the letter. In most cases, it will be necessary to seek shareholder approval through a company resolution; this ensures that existing shareholders agree to the issuance of new shares. It may be necessary if you wish to:
- Change the number of shares the company has and their total value – i.e. share capital
- Change how your shares are distributed
- Cancel any of your shares, or
- Change your shares into other currencies
As part of the process of issuing or transferring shares, you will need to prepare share certificates (please see our free share certificate) and update the company’s register of members and file the relevant forms with Companies House. At Uniwide Formations, you can quickly and efficiently register any new or transferred shares with Companies House using our share services. This includes the issuing of shares and confirmation statements.
The importance of sound record-keeping
UK companies are legally required to keep accurate and up-to-date records of their company shares. This includes maintaining a statutory register of members (shareholders) which records details such as names, addresses, the number and class of shares held, and the dates of purchase or transfer.
Companies are also required to:
- Issue share certificates
- Record any share allotments, transfers, or cancellations
- File relevant updates with Companies House by submitting a confirmation statement at least once a year, confirming the current share structure and shareholder information.
Ensure sound record keeping for company shares is a legal obligation under the Companies Act 2006 and will ensure that you avoid disputes, ensure transparency, and demonstrate compliance to investors, regulators, and HMRC.
Final words
Choosing the right types of shares and structuring share classes carefully ensures a company runs smoothly from the outset. Getting the right setup of shares will help balance control, reward, and legal compliance for your company. Keeping sound share-related records and following the correct legal process for changes in your shares is also essential.
