SEIS / EIS: When it pays to be Ordinary!
I know it’s not cool to aim for being ‘ordinary’ and its not a label that you’ll want attached to your business but when it comes to your SEIS / EIS shares this is exactly the label you want – ordinary shares.
SEIS / EIS shares must be ordinary non-redeemable shares and carry no preferential rights to dividends or assets on a winding-up.
If you have institutional or other non SEIS / EIS investors then things can become more complex, if they say want preferential rights in relation to certain aspects of the business.
In this scenario, differing share classes would typically come into play with say ‘A’ shares for the founders, ‘B’ shares for VCs (both classes may have some preferential rights to varying degrees) and ‘C’ shares for SEIS / EIS investors – these being the ‘highest risk’ ordinary shares.
No one-size fits all but this gives you an idea. If you are going to go down the road of different share classes then bear in mind that this will require formal legal procedures to give effect plus amendments to the Articles of Association of the company (this goes beyond the scope of this course – get yourself a decent lawyer!).
This is a just one of a series of emails from our SEIS / EIS course – you can subscribe to the course below: