3 Reasons a multiple share class company might be right for you

Companies with more than one share class can provide increased flexibility for your business. Here are just a few reasons for choosing a multiple share class company. There are of course many more!

1) Provide different dividend rights

You may want to make dividend payments to owners of one class of shares rather than payments being made to all shareholders irrespective of the amount of input they have with the company.

2) Voting rights

Decision making can be weighted in favour of a particular share class. For example, Directors who also own shares may want to have more control over decisions than shareholders who are not involved in the day to day business matters.

3) Family owned or family run companies

If the company has been set up for a family business, you may want to ensure that the control remains with the family. Restrictions can be put on a class of shares, probably the class with the main voting rights, to ensure that if the shareholder wants to sell their shares, they must first be offered to members of the family.

This can often apply in terms of transferring of shares. With family transfers within a family company, it may be appropriate to allow transfers of shares to members of a shareholder's family without triggering the pre-emption rights. With employee shareholders: it may be appropriate to include a requirement that a shareholder must offer his shares for sale when he or she leaves the company.


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