{"id":189037,"date":"2024-07-03T07:51:15","date_gmt":"2024-07-03T06:51:15","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=189037"},"modified":"2026-03-31T23:40:07","modified_gmt":"2026-03-31T22:40:07","slug":"unequal-dividends-to-shareholders","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/unequal-dividends-to-shareholders\/","title":{"rendered":"Can I Pay Unequal Dividends to Shareholders?"},"content":{"rendered":"\n

Dividends are payments a company makes to its shareholders from its profits. Company law generally requires equal treatment of shareholders, but different share classes can carry different dividend rights. These rights may override the default rule of proportional distribution under the Companies Act 2006<\/em> and your company’s articles of association. This article will outline the different classes of shares and when it is permissible for you to pay unequal dividends to shareholders.<\/p>\n\n\n\n

Understanding Different Classes of Shares<\/h2>\n\n\n\n

Shares often hold rights<\/a> related to voting, dividends, and capital distribution that will be returned on the winding up of the company. All shares of the same class will have the same rights attached to them. To offer different dividends and rights, you can create different classes of shares with varying rights. This can give you flexibility within your structure, allowing you to raise capital but keep control.<\/p>\n\n\n\n

\n

Some common types of shares with different class rights include founder shares, employee shares, preference shares and investor shares.<\/p>\n<\/div>\n\n\n\n

Founder Shares <\/h3>\n\n\n\n

Your company may issue a special type of share to the business\u2019 founders. These can include special rights that give them extra control of the company, such as an automatic right to appoint a director so long as they hold these shares. Often, founders will use dividends to pay themselves<\/a>; by having a separate class of shares, they can pay themselves without having to pay other shareholders a dividend.<\/p>\n\n\n\n

Employee Shares<\/h3>\n\n\n\n

Additionally, your company can issue employee shares under an employee share scheme. Start-ups can use employee shares to motivate employees to help grow the business. Often employee shares will have no voting rights or dividend rights. Instead, the employee can sell them for market value when they leave the business as a reward for their hard work.<\/p>\n\n\n

\n \"Front\n
\n
Due Diligence Guide For Purchasing a UK Business<\/div>\n
\n

Considering purchasing a UK business? Download this free guide for practical tips on conducting due diligence and reducing risks.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n

Preference Shares<\/h3>\n\n\n\n

You may also issue preference shares<\/a> with some preferential rights attached to them, such as rights to:<\/p>\n\n\n\n