Allocating shares to directors at your Australian company
Updated: 8 December 2019
Allocating shares to directors? Here are some useful tips to help you.
1. Shares instead of a director's service fee?
If you have launched a business with another director and with little or no funding, it is likely that you have thought about shares taking the place of a director's service fee, at least in the early stages.
You can get a director's consent so they can receive shares in lieu of a director's service fee. and document this in an agreement.
2. A written agreement
It's a good idea to get a directors consent in writing to receive shares in lieu of a fee for services in the initial stages. A director's service agreement or a founders agreement is a good place to do this.
3. Shares not mandatory
Are you considering allocating shares to a new director that has come on board after the company has been set up?
While a director does not have to be to shareholder, it does make sense to allocate shares to a director to incentivise them to work towards the long term growth and success of the company.
4. The share allocation
To complete the share allocation, you may need to refer to your existing constitution or shareholder agreement as they will usually spell out requirements for the share allocation.
Below are the items you'll need to cover off for the share allocation:
- Application form - a share application form for the director to apply for the shares
- Allotment resolution - to record a decision made at a meeting to allocate the shares; and
- Share certificate - a certificate that is given to the director that records the shares allocated
Do you have questions or comments about allocating shares? Be sure to leave them below.
I wish you success in your ventures!