What is a subdivision and how do I start one?A subdivision is an essential first step in setting up a share scheme or preparing the business for a funding round.
A subdivision (also known as a share split) is the process of increasing the number of shares in a company while decreasing the nominal value of each share, so the aggregate nominal value of all shares remains the same.
For example, most companies incorporate with 100 shares with a nominal value of £0.01 per share. This means the aggregate nominal value – or capital in the business – is £1.
If a founder wanted to issue shares to an investor, they could do so (say 20%), but there wouldn’t be much room for future investment or share issues without giving too high a percentage away. This is where a subdivision comes in.
Subdividing by a ratio of 1,000 would mean the company now has 100,000 shares with a nominal value of £0.00001 per share. The number of shares has increased, but the aggregate nominal value of £1 remains the same.
As you can see, subdivisions make a company’s share capital more liquid. This ensures you can seek funding or set up a share scheme without giving too much of your own stake away.
It’s an essential step for early-stage businesses. And the good news is that Vestd makes the process incredibly simple – plus it’s included in all plans.
How do I start a subdivision?
Simply log in to Vestd and go to Share capital > Share classes via your side navigation, then Start subdivision…From there, you’ll start our guided workflow. It explains everything you need to know as you work your way through.
But we’ll highlight some key information here too:
- We’ll subdivide all of your company’s share classes with the same ratio: this keeps each share class's nominal value the same and reduces the number of resolutions that directors and shareholders need to sign.
- It’s best practice to keep the nominal value to no lower than 6 decimal places: Companies House cannot digitally accept documents when the nominal value has more than. This means Vestd cannot automatically file your documents when required; they would need to be sent manually. Also, please avoid recurring nominal values as the same issues apply.
If you have custom Articles of Association or a Shareholders’ Agreement, we’ll ask you to enter the required pass rates for each. This means the subdivision can automatically complete once the required number of signatures is in. You’ll be able to find this information in your articles of association and Shareholders’ Agreement (if applicable).
Once you’re happy with the subdivision details, send the resolutions for signing and you’re done!
Once they pass, we’ll automatically update your cap table with the new values and send an SH02 to Companies House. We’ll also generate new share certificates for you to sign and issue, if you wish.
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