Ordinary Shares vs Alphabet Shares – Is Your Company Share Structure Still Right?

Posted on 3rd October 2026 by Noah Bentley

When a company is first incorporated, many business owners keep things simple by issuing one class of ordinary shares. Whilst this works perfectly for many businesses, it isn’t always the best long-term solution. As a business grows, brings in family members, rewards key employees or plans for succession, the original share structure may no longer provide the flexibility required. Understanding the different types of shares available and knowing when changes are appropriate can help ensure your company is structured in the most tax-efficient and practical way. 

What are Ordinary Shares? 

Ordinary shares are the most common type of share issued by UK companies. 

Typically, holders of ordinary shares have equal rights to: 

• Vote on company matters.  

• Receive dividends.  

• Share in company assets if the business is wound up.  

For example, if two shareholders each own 50 ordinary shares, they will generally receive 50% of any dividends declared and have equal voting rights. Whilst this straightforward arrangement works well for many companies, it doesn’t allow much flexibility if shareholders wish to receive different dividend amounts. 

What are Alphabet Shares? 

Alphabet shares are separate classes of shares, usually named: 

• A Shares  

• B Shares  

• C Shares  

• D Shares  

Each class can carry different rights, depending on how the company’s Articles of Association are drafted. One of the main advantages is dividend flexibility. Directors may be able to declare dividends on one class of shares without paying the same amount on another class (subject to the company’s Articles and legal requirements). 

This can be particularly useful where: 

• Family members are shareholders.  

• Business owners have differing income requirements.  

• Succession planning is being considered.  

• New investors or directors are joining the company.  

It’s important to note that alphabet shares should never be created solely to avoid tax. Any share structure should reflect genuine commercial intentions and comply with company law and HMRC guidance. 

When Should You Consider Changing Your Share Structure? 

There are several situations where reviewing your company’s share structure could be worthwhile, including: 

• Bringing a spouse or family member into the business.  

• Rewarding key employees with equity.  

• Preparing the company for sale or investment.  

• Improving succession planning.  

• Allowing greater flexibility when paying dividends.  

Every business is different, so what works for one company may not be appropriate for another. 

Changing Your Articles of Association 

Your company’s Articles of Association set out the rules governing how the company operates, including the rights attached to different classes of shares. If you wish to introduce alphabet shares or change shareholder rights, the Articles will often need to be amended by passing a special resolution of the shareholders. Depending on the circumstances, Companies House filings may also be required to reflect the changes. 

What About the Memorandum of Association? 

Many business owners assume both the Memorandum and Articles need updating. In reality, for companies incorporated under the Companies Act 2006, the Memorandum of Association is simply a historical document showing who formed the company. It rarely needs changing. Instead, almost all amendments relating to share rights and shareholder arrangements are made through the Articles of Association. 

Professional Advice is Essential 

Changing a company’s share structure can have implications for: 

• Corporation Tax  

• Income Tax  

• Capital Gains Tax  

• Inheritance Tax  

• Stamp Duty 

• Company law compliance  

For that reason, changes should always be carefully planned before new shares are issued or existing rights are altered. At Steven Burton & Co, we work with businesses to ensure their company structure supports both their commercial goals and tax planning opportunities whilst remaining fully compliant with company law. If you’re unsure whether your current share structure is still suitable, we’d be happy to review it and discuss the options available. 

Next steps

If you feel any of these points are relevant to you and you wish to act upon them, please feel free to get in touch so that we can give you some specific and actionable advice (this article is general in nature and is not intended to provide, and should not be relied on as specific tax or accounting advice.  Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided).

Finally…

The Steven Burton & Co team are here to help you.  If you need a sounding board, some advice or a steer in the right direction, then please don’t hesitate to get in touch.

This material has been prepared for informational guidance purposes only.  Whilst every effort has been made to ensure the contents are accurate, information contained may not be comprehensive.  Furthermore, it is not intended to provide, and should not be relied on for, tax or accounting advice.  Steven Burton & Co Limited can not accept any liability for any errors or omission or for any person acting on or refraining from acting on the information provided.  Steven Burton & Co. Limited are not financial advisors.