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Change ordinary shares to alphabet shares

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I have started a limited company with 3 ordinary shares between 2 directors and we've now realised A and B shares are more suited, as it would allow us to pay dividends at different rates to each share class.

How do I go about changing the existing shares to A and B shares?

Or can I issue Director 1 with 2x A Ordinary shares and Director 2 with 1x B Ordinary share and leave the original shares in place? Would I then be able to pay out dividends at different rates on the alphabet shares and not pay dividends on the original ordinary shares?

Thanks in advance.

Replies (18)

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By johngroganjga
27th Feb 2020 13:55

You can’t issue shares in a new class without first creating the class, and amending the Articles to set out the new rights. This is one for whoever set up the company for you.

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RLI
By lionofludesch
27th Feb 2020 14:36

Yes - don't try this at home.

You need a solicitor or a company registration agent or similar.

You need to have the Articles rewritten and then pass a boat load of resolutions.

It should cost about £200 - £300 + VAT. If only you'd taken professional advice from the outset, eh ?

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By Accountant A
27th Feb 2020 14:58

Just scribble the letters A, B, etc., on the share ceretificates, as appropriate, in red crayon (important that it's red).

Job done!

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By cs1949
27th Feb 2020 15:26

We've only recently registered the company and have standard Memorandum &
Articles and are yet to start trading under the new Ltd company. It's a very small family business.

I'd like to have the new A & B shares to have the same voting rights etc. just the right to differentiate dividends on them.

Would I have the articles amended to details the rights of the new share classes and then issue the shares and allocate them? Is it with an SH01?

Can I keep the original shares and issue dividends on the new ones?

I saw this with accountantccole's answer...
https://www.accountingweb.co.uk/any-answers/changing-to-alphabet-shares-0

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Replying to cs1949:
RLI
By lionofludesch
27th Feb 2020 15:37

cs1949 wrote:

Would I have the articles amended to details the rights of the new share classes and then issue the shares and allocate them? Is it with an SH01?

Can I keep the original shares and issue dividends on the new ones?

I can see that you still fancy doing this DIY.

To protect you from your own foolishness, I'm not going to provide any answer.

I'm a Chartered Accountant and I don't rewrite Articles to issue Alphabet shares.

It's too hard.

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Replying to lionofludesch:
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By Tax Dragon
27th Feb 2020 15:49

lionofludesch wrote:

I can see that you still fancy doing this DIY.

What could go wrong?

Sorry, word missing... what else could go wrong. The DIY incorporation has already been mucked up.

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Replying to cs1949:
By johngroganjga
27th Feb 2020 15:38

As you have been told the first step is to create the new classes and amend the Articles.

Once you have done that you can issue new shares in those classes, or re-designate existing ordinary shares as belonging to one of the new classes - as you prefer.

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Replying to cs1949:
RLI
By lionofludesch
27th Feb 2020 15:55

cs1949 wrote:
. It's a very small family business.


"..... and we don't have any money to pay expensive accountants' fees."

Well, up to you, obviously, but I think you can already see that DIY hasn't gone well so far.

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By cs1949
27th Feb 2020 16:34

I don't plan on rewriting the articles myself. I just wanted to confirm what i had to have done to get these share classes added.

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Replying to cs1949:
RLI
By lionofludesch
27th Feb 2020 16:44

cs1949 wrote:

I don't plan on rewriting the articles myself. I just wanted to confirm what i had to have done to get these share classes added.

Just give your solicitor/CRO/Whoever the outcome you're aiming for and he'll sort it for you.

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By frankfx
27th Feb 2020 16:37

When you have done all that.

Lets us know how deep the quicksand is, though it may be footless.

You will soon find the deep stuff , it replaces the yellow bricks in the cul de sac .

are all members of the family , as shareholder/ directors in accord with the journey and mire that awaits?

what does your DIY shareholders agreement say?

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Replying to frankfx:
Bramble
By Chris.Mann
27th Feb 2020 17:03

It's beginning to look a lot like, Christmas. Every where you go!

And the hole just got bigger and the shovel never got thrown away.

For goodness sake. Take the hint and seek some sensible professional advice, which you will have to pay for.

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By Tax Dragon
27th Feb 2020 17:06

I'm feeling kind, so here's a comment that could be construed as including free advice. (Please don't take it as such though – you haven't provided enough information to assess how relevant any of this is. But…)

(IMHO) HMRC already has the weaponry to take out this sort of planning. No new legislation needed. Indeed, it's a mystery to me why the existing weapons are so seldom used. However, there will surely come a time when they are fired (and fired hard). Softer targets may fall. One softness might exist where share classes have been changed, as you are proposing.

You haven't said much about where you are going from here, but it ***might*** provide you with a more resilient position (if ever HMRC does pull its finger out) were you to scrap your existing mucked up company and start again with one you get right from the off. You're lucky you haven't taken any major steps.

Which reminds me... taking advice before the family(?) transfers the business could be money well spent.

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By MissAccounting
28th Feb 2020 11:03

Out of interest what formation agents are people using to form and make such amendments as this? We currently use QF which have been fine but always good to know who else is out there.

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Jennifer Adams
By Jennifer Adams
29th Feb 2020 17:31

Here's an article on this very subject...it tell you what to do step by step:

Bit old but the practicalities have not changed.

Alphabet shares - get the details right

https://www.accountingweb.co.uk/business/finance-strategy/alphabet-share...

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By frankfx
29th Feb 2020 19:45

Fractured link

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By cs1949
29th Feb 2020 20:28

Thanks for the advice everyone. I've been put on to Inform Direct where you can change your company's existing share classes and they also sell "Enhanced articles of association" for companies with 2 share classes. You also get included the necessary resolutions to send to CH with the replacement Articles.

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Replying to cs1949:
RLI
By lionofludesch
29th Feb 2020 20:48

Very wise.

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