What Are A Ordinary Shares?

If you’re setting up or growing a UK company, you’ll quickly run into the jargon of share classes. One term that pops up a lot is “A Ordinary Shares” (often written “A ordinary shares” in company documents). They’re common in startups and small companies because they offer flexibility without overcomplicating your cap table.

In this guide, we’ll explain what A ordinary shares are, when they’re useful, how to create or change share classes, and the practical steps to issue, transfer or buy them back lawfully under UK law. We’ll also flag the essential documents that help you stay protected from day one.

What Are A Ordinary Shares?

A ordinary shares are a type of “alphabet share” - a set of ordinary shares identified by a letter (A, B, C, and so on). They’re still ordinary shares at their core (so, not preference or redeemable shares by default), but the letter lets you attach different rights to each class in your company’s Articles of Association.

In other words, A ordinary shares are ordinary shares that can carry their own mix of voting, dividend and capital rights, separate from any B or C ordinary shares you might create. This is handy when you want flexibility around who controls decisions, who gets paid what and when, and how exits are shared.

For example, you might give founders A ordinary shares with full voting rights and dividends, while early employees receive B ordinary shares with limited voting but dividend flexibility, or vice versa.

If you’re weighing up naming conventions and how A ordinary shares compare with B ordinary shares and other classes, it’s worth reading a short comparison of Class A vs Class B Shares so you’re clear on the typical differences companies apply in practice.

When Should A Company Use A Ordinary Shares?

Alphabet shares are popular because they offer control and incentive levers without complex instruments. A ordinary shares can be useful where you want to:

• Separate control from economics: Give founders A ordinary shares with full voting rights and dividend rights, while issuing other shares with different voting or dividend rules.
• Tailor dividends: Use class-based dividends, so you can pay dividends at different rates (or not at all) to different classes, if the Articles allow it and directors approve.
• Stage incentives: Keep A ordinary shares for founders and create B/C ordinary shares for team incentives, so you don’t dilute founder control unnecessarily.
• Prepare for fundraising: Reserve A ordinary shares for current owners and create separate classes for new investors, making it easier to customise rights during a round.
• Plan for exits: Set rules around distributions on a sale or winding up, including pari passu (equal) or staggered entitlements across classes.

Imagine this: your company plans to bring in two angel investors who want strong dividend rights but don’t need day-to-day control. You could keep A ordinary shares for the founders (full voting) and issue a separate class with reduced voting but priority dividends. That way, you align everyone’s interests clearly in your constitutional documents.

Just remember: the name “A ordinary shares” itself doesn’t grant special rights. The rights arise from your company’s Articles of Association. So the Articles must be drafted (or amended) to actually embed those A share rights.

How To Create Or Change Share Classes In The UK

You can only use A ordinary shares if your Articles of Association authorise that class and set out its rights. If your Articles don’t currently allow different classes (many “model” articles don’t, or only in a basic way), you’ll need to amend them. Here’s the typical process under the Companies Act 2006:

1) Check Your Current Articles

Confirm whether your Articles already define A ordinary shares and their rights. If not, you’ll need to adopt new Articles or pass an amendment that introduces class-based rights, including A ordinary shares and any other classes you want to use now or later.

2) Pass The Right Shareholder Resolution

Changing Articles requires a special resolution (usually at least 75% approval) unless your Articles demand a higher threshold. Make sure the resolution wording is precise and that meeting or written resolution formalities are followed. If you’re unsure whether you require an ordinary or special resolution for a particular decision, it’s helpful to revisit Ordinary vs Special Resolutions.

3) File Changes Promptly

File the updated Articles with Companies House within the required timeframe (usually 15 days from passing the resolution). Late or incorrect filings can cause delays in transactions and confusion for investors.

4) Consider Class Consents

If you already have more than one class on issue, certain variations to class rights may require separate class approvals. The detail will be in your Articles and the Companies Act. Getting this wrong can trigger disputes or give shareholders grounds to object.

5) Keep Your Cap Table Clean

Once you’ve created A ordinary shares, be disciplined about using the correct class names and rights in all board minutes, shareholder resolutions, share certificates and registers. Consistency prevents headaches during due diligence.

Issuing, Transferring And Buying Back A Ordinary Shares

Once your Articles allow A ordinary shares, you can issue or transfer them as part of your day-to-day governance or investment activity. Here’s how the main events work in practice.

Issuing New A Ordinary Shares (Allotments)

When you issue (allot) new shares, you’ll normally need board approval and, depending on your Articles, existing shareholder authority to allot. You’ll also need to deal with pre-emption rights (the first right of existing shareholders to take up new shares) unless they’ve been disapplied.

Key steps typically include:

• Board meeting to approve the allotment and price.
• Shareholders’ authority (and pre-emption) handled per Articles/Companies Act.
• Subscription paperwork with the investor (for example, a Share Subscription Agreement).
• Issue share certificates, update the register, and file the required form(s) with Companies House within deadlines.

Pricing and documentation matter. Under- or over-valuing shares without proper advice can create tax issues or shareholder complaints, while vague paperwork can leave you exposed to disputes over rights and obligations.

Transferring A Ordinary Shares

Transfers (for example, a co-founder selling or gifting shares) are governed by your Articles and any shareholders’ agreement. Most Articles allow directors to refuse a transfer in certain scenarios to protect the company. You’ll need a proper instrument of transfer, board approval where required, and updates to the register and share certificates. If you’re changing ownership between existing holders, it’s wise to review the rules around Share Transfer before moving forward.

Buying Back Or Redeeming Shares

Private companies can buy back their own shares in certain circumstances, provided they follow strict Companies Act procedures (funding source, contracts, approvals and filings). Many small companies use buybacks to tidy up cap tables when someone leaves the business. Because the rules are technical, make sure the buyback contract and approvals are watertight. For a practical overview of the process and filings, see Redeeming Shares.

Dividends On A Ordinary Shares

If your Articles let you declare different dividends by class, directors can recommend dividends for A ordinary shares independent of other classes, subject to available distributable profits and the usual corporate approvals. Keep robust board minutes and accounts to evidence the decision and the company’s ability to pay.

Tax And Employee Considerations (At A Glance)

Issuing shares to employees or directors can trigger tax consequences, especially if they receive shares at a discount or with restrictions. If you want to incentivise team members, consider HMRC-approved option schemes like EMI, which can be far more tax-efficient than straight share issues. Our team can help you weigh up EMI Options alongside growth shares or unapproved options to find a route that supports your goals without nasty surprises.

Documents And Governance To Get Right From Day One

Alphabet shares only deliver the control and flexibility you’re looking for if the paperwork is solid and consistent. These are the core documents most small companies should have in place around A ordinary shares.

Articles Of Association (Share Class Rules)

Your Articles are the rulebook for A ordinary shares. They should define class rights clearly (voting, dividends, capital, conversion/redemption, pre-emption, drag/tag along and variation procedures). Avoid relying on generic templates - they often miss key investor and founder protections or clash with your growth plans. If you need to upgrade yours, start with robust, tailored Articles of Association.

Shareholders Agreement (Private Contracts Between Owners)

While the Articles bind the company and all shareholders, a shareholders’ agreement is a private contract among the owners that adds extra protections and processes. It typically covers share transfers, decision-making thresholds, leaver provisions, dispute resolution and non-competes. If you’re issuing A ordinary shares to new or existing stakeholders, align everyone with a clear, up-to-date Shareholders Agreement.

Subscription And Investment Documents

When bringing investors on board, document the deal terms properly. A Share Subscription Agreement sets out the price, warranties, conditions precedent, and completion mechanics, and it should dovetail with your Articles and any investor rights. This keeps your round clean and investor-ready for the next stage.

Transfer And Buyback Templates

Have standard, lawyer-drafted transfer and buyback templates ready for common events (a co-founder departure, internal reorganisation, or cap table cleanup). Using ad hoc or borrowed forms risks invalid steps and voidable transactions. If you anticipate repurchases, align the documentation with your Articles and the Companies Act, and plan ahead for approvals and filings related to Special Resolutions where required.

Planning For Future Rounds And Exits

The share class structure you choose today will affect future valuation, control and exit options. Consider how A ordinary shares sit alongside any future investor classes and whether you’ll need to adjust dividend policy, pre-emption, or drag/tag along rights over time. Clarity in your Articles and shareholder contracts now makes due diligence smoother later.

Key Takeaways

• A ordinary shares are ordinary shares defined by class - the letter lets you attach specific rights in your Articles (voting, dividends, capital) to suit founders, team and investors.
• They’re useful when you want flexible dividends, clear control, and clean cap table management as you grow, but the rights only exist if they’re properly embedded in your Articles.
• To create or change share classes, check your current Articles, pass the correct shareholder approvals, and file changes with Companies House on time. Be careful with class consents.
• Issuing, transferring or buying back A ordinary shares involves precise steps: board approvals, pre-emption, contracts, registers and filings. Get the documentation right to avoid invalid or disputed transactions.
• For team incentives, straight shares can be tax-inefficient - consider EMI options or other structured incentives to align rewards and tax outcomes.
• Put strong foundations in place early: clear Articles of Association, a comprehensive Shareholders Agreement, proper subscription paperwork, and reliable templates for Share Transfer and buybacks. This protects your company and keeps you investor-ready.
• If you’re comparing classes, make sure the design of A ordinary shares works alongside other classes - a quick refresher on Class A vs Class B Shares can help you sense-check the setup.

If you’d like help designing A ordinary shares, updating your Articles, or drafting the agreements to issue or transfer shares, our friendly team is here to help. You can reach us on 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.