Class A vs Class B Shares: What UK Firms Should Know

Thinking about setting up or growing your company? One term that might pop up sooner rather than later is “Class A vs Class B shares”. If the difference between A and B shares leaves you scratching your head, you’re not alone. Whether you’re launching your first business, raising investment, or reviewing your company’s structure, understanding what different share classes mean - and why they exist - is essential. Getting your share structure right from the start can have a lasting impact on control, incentives, and what you and your investors receive if the business is ever sold or wound up. In this guide, we demystify Class A and Class B shares, explain why companies use share classes, and walk through the practical implications for UK companies - in plain English.

What Are Shares, Anyway? (And Why Do Different Classes Exist?)

A share is a slice of ownership in a company. Shareholders typically have rights to:

• Vote on certain company decisions at shareholder meetings
• Receive dividends if declared
• Share in any return of capital on a sale or winding up

Companies can create different classes of shares - each with its own bundle of rights. Labels like “Class A” and “Class B” are conventions: what matters is the rights attached in the company’s articles of association. Why use multiple classes?

• Control: Founders retain decision-making power via enhanced voting rights
• Investor protection: Investors secure economic protections or priorities
• Incentives: Employees receive equity without shifting control

How Are Share Classes Defined In A UK Company?

In the UK, the rights of each share class must be set out in the company’s articles of association. These rights can cover, for example:

• Voting: whether the class votes and with what weight
• Dividends: entitlement and priority to income
• Capital: entitlement and priority on a sale or winding up

The flexibility is intentional - it lets you tailor ownership to your goals. Always check the articles to see what “A” or “B” actually mean for a specific company.

What Are Class A Shares And Class B Shares?

There is no legal definition that fixes what “Class A” or “Class B” must mean. Common UK patterns include:

• Class A: often ordinary shares that may carry enhanced voting (for example, more than 1 vote per share). This can help founders retain control. The exact weighting is illustrative only - companies can set any lawful ratio in their articles.
• Class B: often ordinary shares with standard or reduced voting (including non-voting). Dividend and capital rights may mirror Class A, or be tailored in the articles.

Some companies use Class B to bring in outside investors without diluting voting control, or to structure employee equity while protecting founder interests. What matters is the rights package - not the label.

Class A vs Class B Shares: Key Differences Explained

Typical areas where classes differ:

• Voting rights: who gets a say and the weight of each vote
• Dividend rights: who shares profits if dividends are paid
• Capital rights: how proceeds are shared on a sale or winding up

Feature	Class A Shares	Class B Shares
Voting rights	May carry enhanced voting (for example only, 2 votes per share). Weighting is set by the articles.	Often standard voting (for example, 1 vote per share) or non-voting, as defined in the articles.
Dividend entitlement	Frequently equal to B, unless the articles specify a different split.	Frequently equal to A, unless the articles specify a different split.
Capital return	Ordinary A and B shares commonly rank equally unless the articles say otherwise. Different priorities are more typical of preference shares.	As above - check the articles. Priority differences must be expressly set out.

Key message: the label “A” or “B” does not determine value or rights - the articles do.

Do I Need Multiple Share Classes?

Many small companies start with a single class of ordinary shares. Multiple classes become useful when you need to:

• Raise investment while maintaining founder control
• Offer employee equity without shifting voting power
• Differentiate between active and non-active family shareholders

Venture investors often use preference shares for economic protections. Whether you choose ordinary A/B shares or preference shares depends on your goals and negotiations.

Are Class A Or Class B Shares More Valuable?

It depends on the rights:

• Control value: enhanced voting can be valuable to founders
• Income value: stronger dividend rights suit income-focused holders
• Exit value: priority on a sale or winding up protects investors

Investors may accept lower voting power in return for economic protections or access to a growing company. Founders may prefer super-voting shares to preserve control.

How Are These Rights Set Out And Changed?

Rights must be stated in the articles of association. Introducing or changing classes typically involves:

• Board and shareholder approvals: creating a new class or altering rights will usually require a special resolution (75% approval) and updated articles
• Companies House filings: file the special resolution and the updated articles, and complete any required share capital filings when issuing or varying shares
• Variations of class rights: if you vary the rights of an existing class, class consent procedures in the articles and the Companies Act will apply

Getting process or paperwork wrong can create disputes and delays - take advice before you act.

Shares vs Stock - What’s The Difference?

In UK company law, the technical term is “shares”. “Stock” is used colloquially or in other jurisdictions. Focus on the rights attached to shares in your UK articles.

Other Types Of Share Classes

• Preference shares: usually have priority for dividends and/or capital, sometimes without voting rights
• Non-voting shares: used for employee or outside investors where control stays elsewhere
• Redeemable shares: can be bought back by the company on set terms

Whatever you choose, be clear in the articles and ensure every shareholder understands what their class actually means.

How Do Share Classes Affect Growth?

A thoughtful structure can help you:

• Bring in investors while protecting founder control
• Reward and retain staff with equity
• Navigate family ownership dynamics
• Prepare for future transactions - from buybacks to exits

Is There A Standard Set-Up For A And B Shares?

No fixed standard. Typical patterns include:

• Class A (founders): higher voting, equal dividends, capital equal to B unless the articles state otherwise
• Class B (investors or staff): standard or no voting, dividends equal to A unless tailored, capital equal unless expressly prioritised

Design the rights to match your goals, then embed them clearly in the articles.

Key Takeaways: Class A vs Class B Shares In The UK

• Multiple share classes let you tailor control and economics for founders, investors and employees
• “Class A” and “Class B” are labels - the articles of association define the actual rights
• Typical differences relate to voting, dividends and capital - ordinary classes often rank equally for capital unless stated otherwise
• Creating or changing classes requires proper approvals and Companies House filings - get advice before you move
• Many startups begin with one ordinary class, then add classes or preference shares as they grow

If you’d like help reviewing your share structure, updating your articles, or setting up new classes, our corporate lawyers can help. Contact us at team@sprintlaw.co.uk or call 08081347754 for a free, no-obligations chat.