Shares and Share Capital

The owners of a limited liability company own shares from the company. In a company owned by a sole entity, it is possible to have only one share. Anticipating the future it is, however, reasonable at the founding stage of the company to issue more shares making partial transfer of ownership easier.

Private limited liability companies are no longer subject to a minimum share capital requirement. The possible share capital is a form of restricted equity. It is protected for the benefit of the creditors and it may be distributed to the shareholders only in accordance with specific proceedings established for protection of creditors. However, the share capital of a public company must be at least EUR 80.000.If you want to study share capital more thoroughly, see further [Equity Financing]⁠.

There is no longer connection between the shares and the share capital in the Limited Liability Companies Act. A nominal value can be defined in the articles of association, but it is not necessary. In case the company’s articles of association are silent about the shares’ nominal value, a limited liability company may issue more shares without increasing its share capital and, on the other hand, increase and decrease its share capital without this affecting the number of shares. If, however, the articles of association stipulate a nominal value for the company’s shares, when issuing new shares through share issue or on the basis of option rights, the share capital of the company shall be increased by at least the nominal value of the issued shares, and the share capital may not be decreased so that it would fall below the total nominal value of all outstanding shares of the company. Most of the new companies have shares without the nominal value.

Shares are transferable. A share certificate shall be given to the shareholder if he/she so demands. See further, [Share Certificates]⁠.

As a general rule, all the shares of a limited liability company entitle to equal rights, i.e. the share will award one vote in all the matters before the general meetings of shareholders and the shares will have the same rights in the event of distribution of profits. The articles of association may, nevertheless, stipulate that the company has or may have share types, that is, shares with different rights and obligations. Furthermore, the obligations attached to the shares may differ from each other. Classes of shares usually differ from each other by the number of votes or by the amount of dividends they entitle to. Shares of different classes are often called as shares belonging to different series of shares, e.g. series A and series B shares, series A and series K shares, series I and series II shares or common shares and preference shares.

If the company has shares belonging to different share classes, provisions may be included in the articles of association on the conditions and procedures under which shares can be converted from one class to another. It is relatively common for the articles of association to include a provision, according to which shareholders may at any time demand for their shares to be converted from one class to another. The conversion shall be notified for registration without delay. The conversion shall take effect upon registration.

The articles of association may further stipulate that a certain series of shares does not grant any right to vote or does not entitle its holder to vote in specific matters before the general meetings of shareholders. These shares are commonly called non-voting shares. Such a provision may for each matter before the general meeting concern only a part of the company’s shares.

Since the company may have shares, which differ from each other as to their voting rights, and voting restrictions might be attached to the shares, it is not always possible to conclude the percentage of votes by comparing the number of owned shares to the total number of shares in the company.

Unless otherwise provided in the articles of association, each shareholder may vote with the entire amount of votes represented by his/her shares.