There are many service providers that will help you set up a company in Ireland but this will set you back a few hundred euros, for what is actually a very easy process. It is simply a matter of going through the steps on CORE.CRO.ie.
Most people would be more than capable to complete these forms and submissions themselves with no problems and saving that money. In this blog post, we will give you some important information on one part of this process that often causes some confusion.
That is, what is the difference between Authorised and Ordinary Share Capital?
Ordinary Share Capital: is what has been actually allocated to shareholders. These are the shares that they actually own in the company. For example, a company may have two shareholders both holding 50 shares each with a par value of €1 per share. This means the issued share capital of the company is €100.
This amount of €100 is the amount that will appear in the equity/capital section of the balance sheet on the company financial statements.
Under Irish law, there is no obligation to pay up this amount and it can remain unpaid unless in certain circumstances if the company goes into liquidation. The shareholder’s liability in the company will be limited to this €100 amount that remains unpaid on the shares.
It is often wise to keep this issued share capital amount low in terms of monetary value in the event of the company going out of business there is not a big outstanding liable amount due by shareholders.
Authorised Share Capital: is the maximum amount of shares that can be issued to the companies shareholders as per what was set out in the company constitution. It is basically a limit set out by the company rules as to how many shares in total can be issued to investors.
Private Limited companies under the Companies Act 2004 are not required to have an authorised share capital. It may be a sensible option to go with if you foresee the company raising funding in the future to grow the business. At that point, the company will not have to worry about making sure the company formation documents are in order before raising the additional capital.
A company that is Limited by Guarantee etc will be required to include authorised share capital in the company formation documents.
Can you increase the Authorised Share Capital of a company in Ireland?
If your company already has an authorised share capital limit, the members of the company may pass a resolution to change the Constitution of the company and file the relevant updated documentation with the CRO.
A copy of a special resolution is required under section 198 Companies Act 2014 to be submitted to the CRO within 15 days of the passing.
Form B4 is also submitted where there is an increase in the authorised capital of the company. The form must be submitted within 30 days.
Disclaimer: this blog post is for information and educational purposes only.