Why companies have different classes of shares
The word “shares” sounds like it describes one thing, the way “bricks” describes one thing. It does not. A share is a bundle of rights, and you can put different rights in different bundles, which is why a company can have several classes of share that all say “share” on the label and behave completely differently in practice. Founders who assume a share is a share tend to discover the distinction at the worst moment, usually during a raise or an exit.
The rights hiding inside a share
Every share carries some combination of three things: a vote, a claim on dividends, and a claim on what is left if the company is sold or wound up. Change the mix and you change the class. Ordinary shares, the founders' usual holding, typically carry all three in the plain vanilla form. From there, companies build variations for specific jobs.
Why the variations exist
Preference shares, the kind investors often take, sit ahead of ordinary shares in the queue when money is paid out. That is the liquidation preference, and it is the single biggest reason investors and founders end up holding different classes: the investor wants to be paid back first, and a separate class is how you write that down.
Growth shares are built to reward future value, giving their holder a share of the upside above a set point but little or nothing below it, which makes them a common tool for incentivising people without handing over existing value. Non-voting shares let you give someone an economic stake without a say in decisions. Alphabet shares, ordinary shares split into A, B, C and so on, let a company pay different dividends to different holders, which has its uses and its traps.
The most famous example of the class mattering more than the number
If you want to see how much the class can matter, look at Meta. Mark Zuckerberg owns only around 13% of the company by value, a minority stake that in an ordinary setup would leave him answerable to everyone else. He controls it anyway. The reason is a dual-class structure: the public holds Class A shares with one vote each, while Zuckerberg holds Class B shares that carry ten votes each, and that block gives him roughly 61% of the total voting power off a small slice of the equity.
The lesson is not the specific mechanism, which is a US structure and not a like-for-like template for a UK company (UK companies build control through their own articles and class rights, and any such structure needs proper advice). The lesson is the principle it makes vivid: two people can each be described as owning “shares,” and one of them can control the company while the other cannot influence it at all. The number of shares is only half the story. The class is the other half.
Why a founder should care
Because the class you hold determines what you actually own. Two people can each hold “ten per cent of the shares” and have wildly different economic and control positions, depending on the class. When someone tells you your stake, the number is only half the answer. The class is the other half, and it is the half people forget to ask about.
You do not need to become an expert in share classes. You need to know they exist, know which class you hold, and know which class you are handing to someone else before you do it. When you are setting up a structure with more than one class in play, that is the point to get advice, and it is a point we reach with founders often.
How Kyra Law can help
Kyra Law can advise on share classes, growth shares, investor rights and company articles, then prepare or review the documents required for your company structure. For a lawyer review and fast turnaround, contact enquiries@kyralaw.co.uk.