Are you in the process of setting up a new Irish Limited Company? One of the things that the Companies Registration Office (CRO) look for on new company applications is the value of the “Company Capital”, also known as “Share Capital”.
Share capital for new companies is broken down into “authorised share capital” and “issued share capital”. In this guide, we explain the differences between authorised and issued shares and help you with the regulatory requirements when choosing the share capital for new Limited Companies in Ireland.
What is the difference between authorised share capital and issued share capital?
Authorised share capital
The authorised (or nominal) share capital can be considered the maximum share capital the company is authorised to issue (allocate) to shareholders. In general, part of the authorised share capital can remain unissued, and you may never need to use all the authorised capital.
Since the figure is a nominal amount, it can be considered a theoretical amount. The company or its shareholders do not pay the authorised share capital, nor is there any liability for its value.
The amount of authorised share capital must be stated in the company registration application (Form A1) and the company’s constitution.
Issued share capital
The issued share capital is the amount of share capital that has been allocated to shareholders. It can be described as pieces of the company that shareholders own.
For example, if two people set up an Irish Limited Company and have 50/50 control or ownership of the business, 50% of the issued share capital will be allocated to each person.
The shareholders are only liable to pay the value of the issued shares and are not liable to pay any company debts from their personal assets. This concept forms the basis of a limited liability company in Ireland.
What is authorised share capital?
Think of it as a ceiling amount to give shareholders control over the share capital amount
It is a nominal amount – shareholders are not liable to pay this amount
In new companies and startups, it is common that a large portion of the company’s authorised share capital will remain unissued
Increases in the authorised share capital can be done at any stage by filing paperwork with the Companies Registration Office (CRO)
The company constitution must be changed if the authorised share capital is changed
What is issued share capital?
It divides the company ownership and the value of issued share capital must be stated when registering a company in Ireland
Share certificates should be sent to all shareholders once company is incorporated or the shares are issued and shareholders are liable for the value of issued shares
New shareholders can be issued shares at any time and issued shares can be transferred between shareholders
Different share classes can be issued, giving different rights to different issued share classes
100,000 authorised shares
100 issued shares
€1 price per share
Frequently Asked Questions
Are there different classes of shares?
When setting up an Irish Limited Company for the first time, you must prepare a company constitution. In this constitution, you must define how your shares will be classed. For instance, if you want shareholders to have more or less decision-making power, dividends you can choose to give them a different class of share.
When starting a business or if it’s your first time setting up a company in Ireland, we recommend issuing “Ordinary Shares”, which outline standard rights and powers for its shareholders. “Ordinary Shares” are Ireland’s most common share class, and most constitutions will have this class.
When to create different share classes?
When your company is in its growth stages, you might start looking into offering different share classes for investors. Having different classes of shares allows you to take on additional shareholders/investors with varying degrees of rights and decision-making power. For example, equity investors helping you to fund expansion and growth may have different voting rights than the founders.
To make these changes, your company constitution will need to be changed. We advise that you seek professional, outsourced support from an expert Company Secretary firm, such as Accountant Online, to help you with the paperwork.
Can I change the share capital in the future?
As businesses grow and change, your share capital may need to change, too. For instance, you may take on new shareholders and offer shares to longstanding directors or employees, or some shareholders may exit and need to transfer their shares to another shareholder.
Since your company share structure is laid out in your company constitution, changes need to be amended in the company constitution, and the Companies Registration Office (CRO) needs to be informed.
The types of paperwork involved will depend on the changes, so we recommend that you speak to a professional Company Secretarial Firm, like Accountant Online. We will listen to your requirements and advise on the best way forward so you can remain compliant with Company Law.
Tom is a Fellow Chartered Certified Accountant (FCCA) and Chartered Tax Advisor (CTA) and is Accounting Team Manager at Accountant Online. Areas of expertise include Accounting, Compliance, Taxation relating to small business and company directors.