Share Capital In A Ltd Co

businessboy

Hi

Just in the process of setting up a Private Company Limited By Shares and after reading through a few sample MEMO & ARTS i got from cro i seen that companys have share capital of 1,000,000 at €1 each and only 2 shares actually being taken by each director.

What happens to the other 998,000?

Couldnt i just register the company with a share capital of 2 at €1 each and each director take 1 each?

How does this effect the company?

HELP!!!!!!!!!!!!!!!!!!

fiscalstudent

Someone else i think will have more knowledge than me on this but as far as I know, the point of issuing a million shares has to do with if/when your company becomes successful and you wish to release equity, it is a much simpler process.

I have not heard of directors just taking one share each. My experience with this has been they would take 500k each



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businessboy

so if the company was worth 1,000,000 and only had 2 shares then each share would be worth €500k right?

is that why they issue so many, to stop the individual value of each share becoming too high?

cosecretary

Hi business boy

The 1,000,000 refers to the authorised share capital all that it is is the amount of shares you are authorised to issue, how many you actually issue is up to yourself. Generally I would always suggest the higher the authorised share capital the better as it will save you having to increase the authorised share capital in the future.

There really is no downfall to having a high authorised share capital. It is the issued shares that own the company ie if you have two shares in issue shareholder 'a' owns one share and shareholder 'b' owns the second. shareholder 'a' owns 50% of the company and shareholder 'b' has 50% has nothing at all to do with authorised share capital

hope that makes sense but any further queries let me know:)

businessboy

my main concern was that if the company had a 1,000,000 shares valued at €1 each that if anything was to happen to the company it was liable to the value of €1,000,000 instead of the €2 for the 2 shares that was initially invested at the start up.

cosecretary

No like I said it is the issued share capital which determines ownership and indeed liability.

All the authorised share capital is is the maximum amount of shares the directors are authorised to issue up to. The idea behind this is that it gives protection to shareholders so that their interests can not be readily dilluted i.e. the Directors are only authorised to issue shares up to that amount of shares authorised pursuant to the company's memorandum and articles of association. If the Directors want to issue further shares in excess of the authorised share capital they would have to seek shareholder approval; to increase the authorised share capital before they could issue the shares.

Have you thought about using a formation agent to set company up for you? There are a number of good cheap options around should be able to get a company for under €300.00 incl expenses which would include your statutory registers, company seals post incorporation minutes etc.

In any case my only advice when setting up a company is to be very aware of your responsibilities as a Director. The duties of a Director are extremely onerous and every director should be aware of his responsibilities before consenting to act as Director. Be very aware that Directors can be found personally liable if it is proven that they have fraudulently or wrecklessly traded.

If you are not sure what your duties and responsibilities are the odce website have a great booklet for Directors which might be worth checking out.

fiscalstudent

This company take care of all the documentation for you for about €100 i think.

http://www.registeracompany.ie/


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thecleverone

^^^^

Yes, but would you really trust an automated website to draft up legal documents for you?

Plus, as you have to file them yourself with CRO, the process will take approx 8 weeks as opposed to 3-4 days with a registered company formation company.

thecleverone

I have not heard of directors just taking one share each. My experience with this has been they would take 500k each

No no no no no! That bit of advice could cost someone €500,000!!!!

If each shareholder takes 500k shares each, they will each be liable for €500,000 each should the company wind up. Likewise, if they stick to a nominal amount such as €2, then €2 is the amount they contribute should the company wind up.

And some great advice from CoSecretary there as well:

In any case my only advice when setting up a company is to be very aware of your responsibilities as a Director. The duties of a Director are extremely onerous and every director should be aware of his responsibilities before consenting to act as Director. Be very aware that Directors can be found personally liable if it is proven that they have fraudulently or wrecklessly traded.

fiscalstudent

^^^^

Yes, but would you really trust an automated website to draft up legal documents for you?

already did, had a solicitor i know review them and said they were fine

VO

I am not an expert on Company secreterial law, far be it , but some of the stuff being bandied about here in this thread seems to me to be wrong.

talk to an expert , one I have used is www.getregistered.ie, give them a ring and they will put you right. It will save you money and your hair in the long run

thecleverone

already did, had a solicitor i know review them and said they were fine

Why didn't he tell you the basic difference between the authorised and issued share capital in a company then? Because you gave some very dangerous advice on the share capital above, so obviously the above company OR your solicitor didn't explain things very well, if at all to you - hence the stress on using someone QUALIFIED and not someone who knows how to set up an automated website.

Ask a solicitor very general questions about memorandum & articles of association or about company secretarial practices in general, and very few would be able to answer. I know for a fact that most solicitors outsource their company formations and company secretarial work and have never drafted a set of memorandum & articles of association.

cosecretary

I agree with Cleverone either get professional advice or get informed. Personally I would advise the first option I am a company secretary and I can tell you we spend half our time tidying up/changing things that were done by people in error thinking that they know what they are doing. Loads of very reputable companies out there that will look after incorporation for you.

Alternatively get informed I would recommend contacting cro they should be able to help guide you through the incorporations process. I would also suggest reading some background information jordans company secretarial precedents is very good basic company secretarial book goes through the main issues for considertion both in terms of incorporation and ongoing compliance.