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Limited Companies have one or more shareholders.

Larger companies may have many shareholders but a smaller company may only have one or two.

Each shareholder may hold a different number of shares which determines how many votes they have at any Company General Meetings – the voting rights will be set out in the Articles of Association.

There is often only one share class, so all shares hold the same rights, but sometimes there will be more than one share class.

Different share classes might have:

  • Rights to a distribution of the profits (dividends)
  • Different or no voting rights
  • Multiple votes per share versus other share classes
  • Rights in the event of winding up or merger of the Company

The issuing of shares is one way in which the Company may raise capital either when it is formed or later (companies can issue shares which might dilute the shareholdings of existing shareholders but those existing shareholders may have priority rights to apply for additional shares before they are offered to new investors).

Shareholders buy shares from the company or each other. In the latter case, for a listed company there is an established share price based on trading (supply and demand) but in a private company, valuation of shares is more tricky and there may not be a market in shares so buying and selling depends on an agreement between two shareholders or with the Company as, in certain circumstances, a Company may purchase its own shares.