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Limiting the amount of shares people can own?

Is it possible to to limit the percentage shareholding an investor can hold?

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I have a client who is looking to get some investors under the SEIS scheme. However, he wishes to limit the percentage holding he offers to the investors so that he doesn't give up contol for the sake of investment. 

Would it be possible to create sub-class shares that can only hold a maximum shareholding of the overall shares?

For example, 

Company A has 100 ordinary shares @ £1 each. 

It creates a sub-share of 100,000 share @ £2 each that can only hold a maximum of 20% of the original ordinary shares.

Thank you.

Replies (6)

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By Tim Vane
10th Jul 2020 18:17

Perhaps I am missing something but surely once your "client" (quotes intentional) has given up 50% or more of the share capital he has effectively lost control, although this will depend on the articles etc. The normal procedure in this scenario is to have a shareholders agreement that controls what can and cannot be done, and most investors will insist on this anyway so "control" by shareholding is generally irrelevant: key investors will often have effective control of a company regardless of holding - money talks. In any case, these are all questions for lawyers and not for accountants, so you need to point your "client" toward a law firm.

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By lionofludesch
10th Jul 2020 18:33

Hmmm - we've got SEIS and SEISS now.

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By paul.benny
11th Jul 2020 07:24

You can do it - but whether investors would accept it is another matter.

You may also find that investors prefer to put in funds as debt which gives both priority on liquidation and much more effective control than shareholding.

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Replying to paul.benny:
By Moneymad
11th Jul 2020 08:37

That would just be your standard preferential share which the client is happy with but he is more worried about losing control of an idea and business that could make him a lot of money in the long run.

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By bernard michael
11th Jul 2020 09:12

Am I missing the obvious - why not only give away 49% ??

I agree there should be a shareholders agreement

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Replying to bernard michael:
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By thevaliant
11th Jul 2020 14:51

Agreed. It seems overly convulted when if someone is 'worried' about losing control, just offer 49% or less of the shareholding.

If you want to offer more, then be prepared to lose control. It's as simple as that.

(Personally, I think 'clever' attempts to change rights of shares can come back to bite you later on)

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