Share Structure and Classes of shares

Share Structure and Classes of shares

Choosing the correct share structure when setting up a new company requires some foresight. When incorporating a company, it is necessary to choose the classes of shares, restrictions and options that the shares of a company will hold.

There are typically three types of rights that are conveyed onto shares

• Shares may allow the shareholder the right to vote;
• Shares may allow the shareholder the right to receive dividends; and
• Shares may allow the shareholder the right to receive the rest of the property belonging to the corporation following dissolution

The rights mentioned above can be divided into different types or specific classes of shares.

When the Articles of Incorporation (“Articles) are drafted in a boilerplate manner, there is usually only one class of shares. Where there is one class of shares, all shareholders hold the same types of rights. When the class of shares is drafted to reflect a number of different classes of shares, each class may have different privileges, rights, and restrictions.

How many classes of shares will I need, and what number will I require?

Generally, most small corporations will only require one class of shares.

Typically, the number of shares is unlimited unless a maximum amount is specific in the Articles.

How do I separate the classes of shares?

The names of shares are typically listed as Class A, Class B, and Class C. Alternatively, shares may be listed as “common”, “non-voting”, or “preference” shares. The types of shares used will form your company’s share structure.

Larger, public corporations typically have many different types of shares with different rights, privileges or restrictions.

What must I include in my share certificate?

A share certificate must include a number of different items. A share certificate must include the name of the person to whom the share certificate belongs to. Second, the certificate must also include the number of the share certificate. Third, the certificate must include the number of shares conveyed or transferred. Fourth, the certificate must include the date the shares were authorized or transferred. Fifth, the share certificate must include the title of the director and director’s signature required for the conveyance of the share. Lastly, the share certificate must indicate the value of the share and any restrictions.

Regardless of whether you are wanting to set up your corporation or issue additional shares, you will want to get in touch with an experienced corporate attorney.

Our Vancouver and Surrey lawyers are here to assist you with setting up your company. Get in touch with one of our business attorneys today. Call us today at 604-930-9578 or 1-800-930-9986.