How many shares should a startup authorise at incorporation? What is the...

How many shares should a startup authorise at incorporation? What is the maximum number of shares that can be authorised? Par value?

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According to Christina Pretorius, Associate at Norton Rose, authorised shares are all of the shares that have been created in a company.

Once the shares are issued to shareholders, they become issued shares. Therefore, in order to be validly issued, the shares must first have been created, or authorised.

The number of authorised shares is set out in a company’s memorandum of incorporation.

In order to register a company, at least one share must be issued. Usually a start-up business would acquire a shelf company, which already has at least one share in issue. The share is then sold, or transferred, to the new owner.

In order to issue authorised shares, the board of directors of the company must pass a resolution to that effect. The new shareholder is then entered into the company’s register of members, and the company creates a share certificate evidencing the issue, and gives it to the new shareholder.

The issue must also be entered into a separate register. A company’s memorandum of incorporation may set out additional requirements for the issue of shares.

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  • Fanie Heath

    This post in no way actually answered the question. It is weak in my opinion, and should be revisited.

    • Random

      I would say 1 million shares would be a fair amount? If the company grows substantially, how do you allocated parts of a share if you started off with 10 or 100 shares?

      • RexFuzzle

        The real question is whether there is a disadvantage to issuing a million to start with?

      • Random

        I think that if you have intentions of giving employees share options (later on) then you shouldn’t have more employees than shares?

      • Duncan Stegmann

        I think that if you have intentions of giving employees share options (later on) then you shouldn’t have more employees than shares?