What is the Difference between Authorised Share Capital and Issued Share Capital?
When registering a new Irish company, the difference between the Authorised Share Capital (ASC) and the Issued Share Capital (ISC) can sometimes be quite confusing. But it is important to understand the difference especially when setting up a company for the first time. Most company formation agents and accountants will register a new Irish company with an Authorised Share Capital of either €100,000 or €1,000,000 as standard. This can scare people into thinking that they might be potentially liable for this amount. But fortunately, this is not the case!
Authorised Share Capital
The authorised share capital (or nominal share capital) can best be described as the maximum amount of share capital that the company is authorised by its Constitution to issue (allocate) to shareholders. Part of the authorised share capital can (and usually does) remain unissued. It is important to note that this figure is a nominal amount and therefore does not have to pay, nor is there any liability for this amount.
At RegisteraCompanyinIreland.com we recommend that you make your Authorised Share Capital €100,000 divided into 100,000 shares of €1 each. Or if you are looking to secure investment in the future, an Authorised Share Captial of €1,000,000 divided into 1,000,000 shares of €1 each. A high ASC may save you from needing to increase this amount in the future due to possible investment or inflation. There is no downside to having a high Authorised Share Capital but there can be a downside to having a low Authorised Share Capital if it turns out that you need to increase same!
Under the Companies Act 2014, there is no requirement in Irish Law to set an ASC. This is known as the uncapped option, to avail of this when setting up a new Irish company, simply choose not to set an ASC. This is a popular option because it leaves the company in a flexible position should it bring in future investors.
Issued Share Capital
The Issued Share Capital is the total amount of the share capital that has been issued (allocated) to shareholders. Under Irish company law, the issued share capital does not have to be paid up unlike most European countries, however, the shareholder’s liability is limited to the amount that remains unpaid on the shares. This concept forms the basis of a limited liability company in Ireland.
At RegisteraCompanyinIreland.com we recommend that you have your Issued Share Capital low to begin with, as this is the amount you are actually liable for. We recommend an Issued Share Capital of €100 divided into 100 shares of €1 each. If you prefer to issue more than 100 shares at the outset, you could consider making the ‘par value’ of the shares 1 cent instead of 1 euro. Having one cent shares means you could have 10,000 shares issued on incorporation, but still have the ISC at just €100 in monetary terms. You can even have the par value of the shares as low as €0.0001 if you wish.
A previously mentioned, under the Companies Act 2014, a Private Company Limited by Shares (LTD) is not obliged to have an authorised share capital however, it must have an issued share capital. All other company forms must have both an authorised and issued share capital.
For more information on how to structure the optimum share capital for your new company and ensuring you get your new business off to the best possible start, please don’t hesitate to Contact Us today. Our expert team would be happy to assist you to register a company in Ireland.