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What is a subdivision of share capital?
What is a subdivision of share capital?
Abeer Haider avatar
Written by Abeer Haider
Updated over a week ago

A subdivision of share capital is the division of a company’s existing shares into more shares. The proportionate equity of each Shareholder remains the same. For example, 10 shares at USD 10 each nominal value become 100 shares at USD 1 each. This is the opposite to a consolidation of share capital. Subdivision can be conducted by Ordinary Resolution of the Shareholders (unless the articles of association prohibit this). These changes do not cause a change in the overall share capital and as such are simply nominal changes. A company may need to carry out a subdivision of share capital when it decides to raise funding. This is because when a founder creates a company, often he will just create one share per founder or maybe 100 shares split amongst multiple founders. Therefore if the company has 100 in issue shares and it is looking to give away 15% equity then it would need to issue 17.6 new shares. This will not work because, firstly, you cannot have fractional shares and, secondly, the price per share would be very high (in this example it would be USD 11,764). Therefore people wishing to invest a small amount could not do so as they would be restricted to investing USD 11,764 or some multiple of this. The solution in this scenario is therefore to sub-divide the share capital from 100 shares into 100,000 shares.

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