Share capital is the foundation of a company limited by shares. It determines who owns the company, how profits are shared, who can vote at general meetings and what happens if the company is sold or wound up. As a business grows, takes on investors or brings in new partners, its share structure usually needs to change, either by issuing new shares or by moving existing shares from one person to another.
Share Capital Basics
Each share has a nominal value, such as €1, which is fixed in the company's constitution and on its share certificates. The issued share capital is the total nominal value of all shares that have been issued to shareholders. There is no minimum share capital for a private company limited by shares (LTD), and many companies are formed with as little as €1 or €100. Since the Companies Act 2014, an LTD is no longer required to have an authorised share capital, although many continue to have one in their constitution.
Classes of Shares
Most small companies have a single class of ordinary shares, with equal rights to vote, receive dividends and share in any surplus on a winding up. A company can, however, create different classes of shares with different rights, for example:
- Preference shares, which carry a priority right to dividends or to a return of capital.
- Non-voting shares, often used to give family members or employees an economic interest without control.
- Redeemable shares, which the company can buy back on agreed terms.
The rights attached to each class are set out in the constitution, and creating a new class usually requires a special resolution of the members.
Allotment of Shares
An allotment is the creation and issue of new shares by the company. It increases the company's issued share capital and brings in a new shareholder or increases an existing shareholder's holding. Allotments are commonly used to bring in investors, raise capital or reward key employees.
- The directors must have authority to allot shares, either under the constitution or by a resolution of the members.
- Existing shareholders may have pre-emption rights, entitling them to be offered new shares first in proportion to their holdings, unless those rights are disapplied.
- The allotment must be notified to the Companies Registration Office (CRO) within 30 days.
- The register of members must be updated and share certificates issued, generally within two months.
Transfer of Shares
A share transfer moves existing shares from one person to another. The company's issued share capital does not change. Transfers happen when a shareholder sells, gifts or otherwise passes on their shares, for example when a co-founder leaves the business or ownership is passed to the next generation.
- Transfers are made using a stock transfer form signed by the transferor.
- The constitution of an LTD usually gives the directors discretion to refuse to register a transfer.
- Stamp duty at 1% of the price paid, or of the market value where the shares are gifted or transferred below value, is payable by the buyer and returned to Revenue within 44 days of the transfer being executed.
- The register of members is updated and new share certificates are issued. The transfer is reflected on the company's next annual return.
Tax and Compliance Considerations
A share transfer can give rise to capital gains tax for the seller at 33%, and gifts between connected persons are treated as taking place at market value. Gifts of shares can also have capital acquisitions tax consequences for the recipient. Both allotments and transfers can change who counts as a beneficial owner, so the company's internal beneficial ownership register and the central Register of Beneficial Ownership may also need to be updated within 14 days.
Why Accuracy Matters
Errors in share records, such as missing allotment filings, unstamped transfers or out-of-date registers, are among the most common issues raised in due diligence when a company seeks investment or is sold. They can delay transactions and sometimes require formal rectification. Keeping the share structure accurate from the outset avoids these problems.
For further guidance and support with share allotments and share transfers, contact Setup Your Company at info@setupyourcompany.ie or call us on 01 628 3177.
