Explaining Shares and Dividends #AskAMS

How ownership of a company is represented by the shares held by each shareholder.

Most Companies are ‘limited’ by shares, and ownership of the Company is represented by the number of shares held by shareholders. e.g. 20 of 100 shares = ownership of 20% of the Company. Typically, in shareholder meetings, one share = one vote.  Shares also give the owner a share of the value of the Company when it is sold or wound up. Profits are paid out of the Company as dividends to shareholders when proposed by the Directors in proportion to shares held.

Directors proposing a dividend, should draft a ‘Minute’, and pay out the dividends to the shareholders; then they should issue a dividend voucher to each shareholder. For most small Companies, an accountant is consulted regarding the tax efficient split of shares between directors and their partners/spouses to ensure that minimum tax is paid.