By
August 26, 2026
What types of shares can a UK limited company issue?
A UK limited company can issue different types, or classes, of shares. Each class can carry its own voting, dividend, capital and redemption rights.
The most common type is the ordinary share. Many small companies issue only one class of ordinary shares because this provides a simple way to divide ownership and profits. Companies with investors, employees or more complex ownership arrangements may use additional share classes.
A share class is a group of shares carrying the same rights.
These rights may determine:
A company must clearly define the rights attached to each class in its articles of association and statement of capital.
Ordinary shares are the most common type of shares issued by UK private limited companies.
They will often provide:
For example, if a company issues 100 identical ordinary shares and one shareholder owns 60, that person will usually hold 60% of the ownership and voting power.
However, the precise rights depend on the company’s articles. The word “ordinary” does not automatically guarantee a particular set of rights.
Preference shares usually give their holders priority over ordinary shareholders when dividends are paid or capital is returned.
They may provide:
Preference shares are often used by companies raising external investment.
A preference dividend is not automatically guaranteed. The terms must explain whether it is payable only when declared and whether unpaid dividends accumulate.
Cumulative preference shares allow unpaid preference dividends to accumulate.
If the company cannot pay a dividend in one year, the unpaid amount may be carried forward. It will usually need to be paid before ordinary shareholders receive dividends in a later period.
The precise treatment depends on the rights attached to the shares.
With non-cumulative preference shares, an unpaid dividend does not normally carry forward.
If the company does not declare the preference dividend for a particular period, the shareholder usually loses the right to receive that dividend later.
Redeemable shares are issued on terms that allow the company to buy them back at a future date or following a specified event.
Redemption may take place:
The company must comply with the Companies Act 2006, its articles and the terms of issue when redeeming shares.
A private company cannot normally have only redeemable shares in issue. At least one non-redeemable share must remain.
Non-voting shares allow someone to own part of the company or receive dividends without having the usual right to vote on company decisions.
They may be suitable for:
Non-voting shareholders still have the rights specifically attached to their class and may retain certain statutory protections.
A company may issue a class carrying enhanced voting rights.
For example, some shares may provide:
Enhanced voting shares may allow founders to retain control after bringing in new investors. The rights must be carefully drafted and properly disclosed.
Deferred shares usually carry limited economic or voting rights.
Their holders may receive dividends or capital only after other classes of shareholders have been paid. In some cases, the rights are so limited that the shares have little practical value.
Deferred shares may arise after a company reorganises its share capital or changes the rights attached to existing shares.
Alphabet shares are separate classes identified by letters, such as:
Each class may carry different voting, dividend or capital rights.
For example, A shares may carry voting and dividend rights, while B shares carry dividend rights but limited voting rights.
Alphabet shares are sometimes used by family-owned or owner-managed companies. However, they should be carefully structured because paying different dividends to different classes can have legal and tax consequences.
Growth shares are designed to participate in increases in the company’s value above an agreed threshold.
For example, growth shares may receive value only if the company is sold for more than a specified amount.
They are sometimes used to reward employees or management teams without giving them an immediate interest in the company’s existing value.
Growth-share arrangements can be complex and normally require professional valuation, legal and tax advice.
A company may issue shares to employees as part of a reward, retention or incentive arrangement.
Employee shares may:
The company should consider employment, tax, valuation and securities-law requirements before introducing an employee share arrangement.
Management shares may be issued to directors or senior employees.
They can provide:
The term “management shares” is descriptive rather than a single legally defined class. Their rights depend entirely on the company’s documents.
Founder shares are shares held by the people who established the company.
They may be ordinary shares or a separate class carrying rights such as:
“Founder shares” is not a fixed legal category. The actual rights must be stated in the company’s articles and other agreements.
Convertible shares can be converted into another class of shares under agreed conditions.
For example, preference shares might convert into ordinary shares:
The conversion terms should explain the timing, procedure and number of replacement shares issued.
Participating preference shares may provide both a preferential return and an additional share of remaining profits or sale proceeds.
For example, a holder might receive their investment back first and then participate alongside ordinary shareholders in any remaining capital.
These shares are sometimes used in investment arrangements and require clearly drafted rights.
Yes. A UK limited company can issue multiple share classes.
For example, a company might issue:
Using several classes can provide flexibility, but it also increases the company’s legal and administrative complexity.
No. Different classes may have different dividend rights.
One class may receive:
However, dividends must be paid according to the rights attached to the shares and only from profits legally available for distribution.
Directors should not assume that different dividends can be paid simply because shares have different letters. The dividend rights must be properly established.
Creating a new share class may require the company to:
The correct procedure depends on the company’s existing constitution and the proposed rights.
Prescribed particulars describe the principal rights attached to each share class.
They should cover:
These particulars are included in the company’s statement of capital filed with Companies House.
Descriptions should be specific. Simply stating that shares have “standard rights” may not adequately explain what shareholders are entitled to receive.
For many small companies with one owner or a straightforward ownership arrangement, one class of ordinary shares is sufficient.
Different share classes may be appropriate where:
A company should not create multiple classes unless there is a clear reason for doing so.
Common mistakes include:
Ordinary shares are the most common type issued by UK private limited companies.
Yes. A company can issue ordinary shares to founders and preference shares to investors, provided each class’s rights are clearly defined.
Yes. A company can issue non-voting shares while still providing dividend or capital rights.
Yes. One person or organisation may hold shares from more than one class.
No. Lettered shares are different only if the company’s articles or resolutions give them different rights.
Yes, but changing class rights normally requires the company to follow its articles, obtain the necessary consents and comply with the Companies Act 2006.
A UK limited company can issue ordinary, preference, redeemable, non-voting, deferred, alphabet, growth and other specially designed shares.
Ordinary shares are generally suitable for straightforward companies. More complex classes can help manage investment, control, dividends and employee incentives, but their rights must be clearly documented.
Companies should obtain legal and tax advice before creating multiple share classes or changing existing shareholder rights.
This article provides general information and does not constitute legal, tax or financial advice.
