Issuing shares is fundamental to managing and growing a limited company in Ireland. It serves multiple strategic purposes—raising capital, attracting new investors, incentivising employees, or restructuring company ownership. Regardless of the reason, understanding the legal and procedural steps involved is critical to ensure compliance with Irish company law and to support sound corporate governance.
What does it mean to issue shares?
Issuing shares means creating and allocating ownership interests in a company to shareholders. In a Private Company Limited by Shares (Ltd), this is a common way to raise capital or change the company’s ownership structure. Issuing new shares increases the total number in circulation and can dilute the ownership of existing shareholders unless they receive additional shares.
Legal Framework
The process is governed by the Companies Act 2014, which outlines the rules for company administration in Ireland, including the issuance of shares. It is essential to follow these rules carefully to avoid legal complications.
Key Steps to Issuing Shares
1. Check the company’s constitution
Before issuing shares, review the company’s constitution to ensure that it allows for the proposed share issue. Most Ltd companies in Ireland have broad powers to issue shares, but confirming any restrictions or special rights is essential.
2. Board Approval
The company’s Board of Directors must approve the issuance of new shares. The board typically passes a resolution to document the decision and specify the number, class, and price of the shares to issue.
3. Pre-emption rights
Check whether existing shareholders hold pre-emption rights, which is the right to receive an offer for new shares before others. The company’s constitution or shareholders’ agreement typically outlines these rights, which help prevent dilution of existing ownership.
4. Issue Shares and Receive Payment
Shares can be issued for cash or non-cash considerations (such as assets or services), but the company must receive full payment or an agreed-upon value. Record the details for the transaction, including:
- Name of the shareholders
- Number and class of shares issued
- Amount paid per share
5. Update the Register of Members to reflect the new shareholders and shareholdings. This is a legal requirement.
6. File with the Companies Registration Office (CRO)
Within 3o days of the share issue, the company must file a Form B5 with the CRO. The form notifies the CRO of the new shares issued, and it must be completed accurately.
Considerations for Different Share Classes
Irish companies can issue various classes of shares—such as ordinary, preference, or non-voting shares—each with distinct rights and obligations.
- Ordinary shares: These are the simplest type of shares, usually issued to company founders. They come with full voting rights and entitle holders to dividends when profits are distributed. In liquidation, ordinary shareholders are paid after creditors and preference shareholders.
- Preference shares: These shares attract investors by offering priority over ordinary shares for dividends and capital repayment. However, they usually have limited or no voting rights. Startups often issue them to angel investors or venture capitalists.
- Non-voting shares: These shares do not carry voting rights but may have similar dividend rights to ordinary shares. They are ideal for employees or family members who want a stake in the company without being involved in management.
If a new class of shares is being created, the company may need to amend its constitution and clearly define the rights attached to that class.
Tax Implications
It is advisable to seek professional tax advice to ensure compliance with Revenue requirements and avoid unintended liabilities. At Nexiō, we provide expert guidance on the legal, tax, and corporate implications of issuing shares, ensuring your business stays compliant and strategically aligned. Contact our team today to take the next step with confidence.
Conclusion
Limited Companies use share issuance to attract investment, incentivise key people, and manage ownership. However, they must adhere to Irish Company Law and maintain proper corporate governance throughout the process. Always consult with a legal or corporate services professional if you’re unsure.
