What is an authorised share capital and does my LTD company need one?

By Andrew Lambe, 14th December 2015

What is authorised share capital?

The authorised share capital (often referred to as the nominal share capital) is the maximum amount of share capital a company can issue to its shareholders according to the company’s Constitution. In most cases a portion of the company’s authorised share capital will remained unissued. The company will not become liable for the amount of as until it has been issued to a shareholder.

What is Issued Share Capital?

The Issued Share Capital is the total amount of shares that has been allocated to shareholders. Unlike the majority of European countries, Irish law does not require the issued share capital of a company to be paid. The shareholders liability in the company will be limited to the amount that remains unpaid on the shares. This concept forms the basis of a limited liability company in Ireland.

We usually advise that you issue a low share capital to begin with, as this is the amount you are actually held liable for. For example, An Issued Share Capital of €100 divided into 100 shares of €1 each. If you would rather issue more than 100 shares, you may consider making the ‘par value’ of each share €0.01 instead of €1. This basically means that you could have issued 10,000 shares on incorporation however the Issue Share Capital will remain at just €100 in monetary terms.

Does my LTD Company need to have an authorised share capital?

Since the introduction of the new Companies Act 2014, a LTD company can opt to remove the cap on the authorised share capital and therefore have an unlimited amount of shares if required. It is at the discretion of the company directors and shareholders whether or not they would like the company to have an authorised share capital but it seems that the majority of companies are electing not to have an authorised share capital.
Previously under the old Companies Act 1963 – 2013, if a company wanted to increase its authorised share capital they would need to file an increase with the CRO at an added expense to the company. This change in legislation allows a LTD to take future investment at any given time and ultimately gives greater freedom over the control of the company.

For more information on any of the above or to incorporate a company in Ireland, please do not hesitate to contact Company Bureau on +3531 646 1625 or email formations@companybureau.ie.

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