By Andrew Lambe, 14th December 2015 (Updated 30th October 2020)
What is an 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 remain unissued. The company will not become liable for the amount until it has been issued to a shareholder.
What is Issued Share Capital?
The Issued Share Capital is the total amount of shares that have 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 shareholder’s 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 choose to remove the cap on the authorised share capital and therefore have an unlimited amount of shares. 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. However, it seems that the majority of companies are electing not to have an authorised share capital because it leaves the company in a more flexible position should there be changes to the Share Structure in the future.
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 the 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 us today or call +3531 646 1625.
Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.