Share redesignation: A guide to converting your company shares

Your company’s share structure determines who gets a vote, how profits are divided, and who receives what in capital distributions.

When a company is first incorporated, a single class of ordinary shares (a basic class that provide rights to voting and profit) is usually enough. But that setup doesn’t always keep up with the business. Maybe you’re taking on investors, maybe a co-founder is stepping back, or perhaps you want to reward team members without giving them voting rights.

In situations like these, a share redesignation lets you move existing shares into a different class without issuing any new ones. The new class itself needs to be created separately, but redesignation is the mechanism that moves your shares into it.

Read on to learn what share redesignation involves, the legal groundwork, and how to carry out the process step by step.

What does share redesignation mean?

Simply put, share redesignation is about changing the class that shares in a company belong to. In other words, it’s a case of moving the shares from one class to another. You’re not creating anything new, but reconfiguring what’s already there, much like reconfiguring seats on a bus without creating a new bus, for example.

Let’s say your company has 100 ordinary shares, and you want 50 of them to convert to Class B non-voting shares. That would require a redesignation. After this is done, the company still has 100 shares. Their nominal value hasn’t changed. What has changed is the class that those 50 shares belong to – and sometimes with it, the rights those shares carry.

You might also hear this referred to as a “reclassification” or “conversion” of shares. The important distinction here is that no new shares are being created.

In contrast, when a company issues additional shares, its share capital increases. With a redesignation, share capital remains unchanged – only the classification changes. The articles of association and shareholder approval governs how and when this can happen.

• Understanding limited company shares
• Can I sell shares in a private limited company?
• What does it mean when a company is limited by shares?

Typical rights attached to limited company shares

To make sense of why a company might re-designate shares you need to know what each share class means, and its intended uses. Here’s a quick overview of the main types you’ll encounter.

Ordinary shares

Ordinary shares, normally the starting point for new companies, typically grant voting rights and dividends. They initially usually carry one vote each, equal dividend entitlements, and equal rights to the company’s remaining assets if it’s wound up.

However, companies sometimes change ordinary shares into different lettered classes – A, B, C, and so on. These “alphabet shares” let you vary the rights to each letter, most commonly with respect to dividend entitlements. The company decides how many classes to create and what each one gets.

Non-voting shares

Non-voting shares typically restrict or remove the holder’s ability to vote on company matters. However, the exact terms depend on what the articles of association state for that particular class.

For example, this could be helpful when you want someone – an employee, a family member, an adviser – to benefit financially from the business without playing a hand in its operations or governance.

A common example is shareholders who want their children to receive dividends from the company but aren’t ready to hand over any decision-making power.

Preference shares

Preference shares rank ahead of ordinary shares, namely with respect to dividends. The holder receives a fixed or variable dividend – usually expressed as a percentage of the share’s original value – before other classes of shareholders receive anything.

They can be attractive to investors seeking returns, which is why venture capitalists (VCs) and angel investors might request them when investing. The company’s articles determine the specific rights they carry and the terms agreed at the point of issue.

Redeemable shares

These come with a built-in buyback mechanism. The company can repurchase them at a later date on the terms agreed when the shares were first issued – that could be a fixed price, a formula, or another arrangement.

They’re typically used as an exit route for shareholders who want to leave the business in an orderly way, or as a mechanism for buying out specific stakeholders. Whether it’s the shareholder or the directors who trigger the buyback depends on what the articles allow.

Each of these classes serves a different purpose, and redesignation lets you move shares between them when the original setup no longer serves the business.

Deferred shares

Deferred shares carry heavily restricted rights – typically no voting power, no entitlement to dividends and little or no claim on the company’s assets unless every other class has been repaid in full.

This share class has essentially no substantive entitlements.

Companies commonly use them when a shareholder is leaving the business and the company wants to neutralise their shares without cancelling them outright. Redesignating ordinary shares into deferred shares effectively parks those shares – the former holder retains them on paper, but the rights attached are minimal. The company can then redeem or buy them back later if the articles allow it.

They can also be useful during restructures where the company wants to simplify who holds meaningful economic and voting rights, without going through a formal share buyback or cancellation process straight away.

Why might a company redesignate shares?

Companies redesignate shares for several reasons, often tied to changes in business priorities. Here are the most common situations.

Protecting decision-making as the company grows

Bringing in new shareholders is a natural part of growth, but it can dilute control if too many people are entitled to vote on company matters.

Redesignating shares into classes with weighted or restricted voting rights lets the founding team or lead investors retain control, even as the ownership base widens.

Changing how dividends are paid

When all shareholders hold the same class of shares, every share carries the same dividend entitlement – so each one receives the same amount per share. That’s fine until company or personal circumstances change.

For example, suppose a company has three shareholders: one who works full-time in the business, one who contributed startup capital but isn’t involved day to day, and one who joined later on. Each may have a very different relationship with the company, yet under a single share class, they all receive the same return.

By redesignating into different classes with distinct dividend entitlements, the company can tailor how profits are distributed to reflect each shareholder’s role, contribution, and level of involvement. This is one of the most common reasons companies move from a single share class to an alphabet share structure.

Giving people a financial stake without a vote

Sometimes you want employees, family members, or advisers to share in the company’s success without giving them influence over strategic decisions. Redesignating their shares into a non-voting dividend-bearing class achieves exactly that.

Take a company with two co-founders who each hold 50% of the ordinary shares. As the business grows, they want to bring in a senior employee and offer them a share in the profits without giving up any voting control.

By redesignating their existing ordinary shares into Class A shares with full voting and dividend rights, they can then create a new Class B share class carrying dividend rights but no voting rights. The senior employee receives Class B shares, benefiting from the company’s success, while the founders retain full control over decision-making.

Making the company investable

A messy or inappropriate share structure can complicate a funding round or investment.

If the company has been running a single class of ordinary shares but some shareholders have different roles, entitlements, or levels of involvement, redesignating shares beforehand can tidy things up.

For example, you might redesignate shares held by a passive family member into a non-voting class, or move different shareholders into alphabet share classes so their dividend entitlements match their roles and contributions.

Adjusting roles as shareholders step back

People’s involvement in a business changes over time. A co-founder might move to an advisory role, or a family member might inherit shares without any interest in running the company.

Redesignation lets you scale back voting rights for those individuals while preserving their financial entitlements.

If someone is leaving the business entirely, their shares could be redesignated into deferred shares – effectively stripping away voting, dividend, and capital rights without cancelling the shares outright. The company can then buy back or redeem those shares later if the articles allow.

However, when someone leaves entirely, removing a shareholder is a separate process worth exploring.

Preparing for a sale, merger, or succession

If the business is heading towards an exit, a clean, purposeful share structure can accelerate due diligence and make the deal more attractive.

You might redesignate shares to untangle voting control from economic rights, or to make sure key people have the right incentives locked in. The process of selling shares or transferring shares often follows.

Legal prerequisites for redesignation

Key legal prerequisites must be met for share redesignation. Be aware that additional steps may be required if you plan to change shareholders’ rights through the redesignation process.

The articles of association

Everything starts here. The articles of association must permit the company to have more than one class of share, and any class the company wants to use must be created – with its rights defined – before shares can be redesignated into it.

These rights – voting entitlements, dividend terms, capital distribution on winding up – are sometimes referred to as “prescribed particulars.” In plain terms, they’re the specific rules governing what each class of share gets.

If your company uses the model articles, you may need to amend them first. The model articles do permit different share classes in principle. Still, they typically don’t include the necessary detailed provisions for classes such as alphabet shares, non-voting shares, or preference shares.

Amending the articles

If the articles don’t support the redesignation or don’t specify the needed classes, you’ll normally need to change them. This requires a special resolution – at least 75% of shareholders must vote in favour. Share class consents may also be required.

Once passed, file a copy of the resolution and the updated articles at Companies House within 15 days.

What happens if the redesignation reduces someone’s rights?

If the new class gives a shareholder fewer rights than before – for example, less voting power, weaker dividend rights, or reduced rights on a sale or winding-up – the change will usually amount to a variation of class rights.

That means the company must follow the correct class approval process, not just pass a general shareholder resolution. This matters because a company cannot usually strip shareholders of their rights without following the proper class consent process. If the required process is not followed, the redesignation may be subject to legal challenge.

When this can apply

This issue commonly arises where a redesignation:

• Removes or reduces voting rights
• Changes dividend entitlements (for example, fixed to discretionary, or lower priority)
• Reduces rights to capital on a winding-up
• Changes rights attached to transfers, redemptions, or other protections in the articles

What the company usually needs to do

If rights are being reduced or changed, the company should usually:

• Check the articles for the class consent procedure
• Obtain the required approval from the affected class. The articles may set out an approval procedure
• If they don’t, the statutory default usually applies as per Section 630 of the Companies Act: approval must be given either by the written consent of holders of at least 75% in nominal value of the issued shares of that class, or by a special resolution passed at a separate meeting of that class
• File form SH10 as well as SH08, where rights are being varied
• Keep a clear written record of the approvals and the effective date of the change

Even if 75% approve, holders of at least 15% of the affected class who didn’t consent or vote in favour can apply to court to cancel the variation.

Step-by-step process for share redesignation

After confirming legal requirements, follow these steps to complete the share redesignation process:

1. Confirm the articles support the change

Verify that multiple share classes are permitted and that the articles permit reclassification. If they don’t, amend them by special resolution first. You must also ensure the share classes you need have been created, before proceeding.

2. Pass the required shareholder resolution

The company needs to pass a resolution approving the redesignation. In most cases, this will be an ordinary resolution – a simple majority of votes. It can be done in writing or at a general meeting.

The resolution should record who’s having their shares redesignated, how many, what class they’re moving from, and what class they’re moving to. Check whether the articles set a higher approval threshold – some do.

3. Obtain separate class consent where needed

If the redesignation alters the rights of an existing share class – voting entitlements, dividend terms, or capital rights – the company must follow the class consent procedure set out in the articles.

If the articles are silent on this, the statutory class-consent rules apply. Affected shareholders can object if they consider the change unfair.

4. Update the register of members

Amend the register to reflect the new share classes as soon as possible. If a shareholder’s voting power or overall control has shifted, check whether their PSC information needs to be updated at Companies House.

5. File form SH08 at Companies House

Within one month of the redesignation, submit form SH08 to Companies House.

You’ll need to provide the company registration number, the full company name, the redesignation date, and the share classes before and after the change. You can file online through the Companies House document upload service or send it by post.

6. Issue replacement share certificates

Each affected shareholder should receive a new certificate showing the redesignated share class. The old certificates must be returned to the company and either cancelled or securely destroyed.

Filing SH08 with Companies House

Form SH08 is the document that formally notifies Companies House of a redesignation. It must be filed within one month of the redesignation taking effect.

The form asks for:

• Company registration number
• Company name in full
• Date of the redesignation
• Original class of the shares
• New class after redesignation

Missing the deadline is a criminal offence under the Companies Act 2006, and both the company and its officers can be held accountable.

Updating registers and issuing new share certificates

The Companies House filing is only the external piece. Internally, several records need to reflect the new position.

Register of members

This is the company’s legal ownership record. It must be amended to show the updated share classes and kept at the registered office or Single Alternative Inspection Location (SAIL) address for inspection. Shareholder information held publicly at Companies House should match.

PSC information at Companies House

Since November 2025, companies no longer maintain a local PSC register – this information is now held centrally at Companies House.

However, directors are still responsible for making sure it’s accurate. If the redesignation changes a shareholder’s voting percentage or influence, review whether their PSC details need updating via a filing at Companies House.

Share certificates

Send out new certificates to every affected shareholder within two months. The originals should be returned to the company for cancellation.

Additional compliance: Confirmation statement and articles

Filing form SH08 and updating your registers covers the immediate requirements, but there are a few further compliance points to address.

Getting these right helps avoid inconsistencies that could surface later during audits, investment rounds, or shareholder queries.

Confirmation statement

The next confirmation statement the company files must reflect the updated share structure.

This annual filing confirms that everything Companies House holds about the company is accurate – so any changes to the share classes, and to individual shareholders’ holdings, need to be reflected.

Updated articles

If the articles were amended as part of the redesignation, the revised version should already be on file at Companies House, together with the special resolution used to adopt them. Keep a copy in your own company records as well.

Shareholder agreements

Any existing shareholders’ agreement should be reviewed for references to specific share classes, voting arrangements, or dividend terms. If the redesignation has changed any of those things, the agreement may need to be updated to remain consistent with reality. Leaving this undone can cause confusion or disputes down the line.

Dividend and tax records

Ensure your accounting software reflects the new share classes so dividends can be calculated and paid at the correct rates going forward.

If the redesignation was partly motivated by tax planning, double-check that payroll and tax arrangements are updated too.

Post-redesignation compliance checklist

Use this checklist after the redesignation is complete to make sure all filings, records, and internal documents have been updated.

Common mistakes to avoid during share redesignation

In most typical scenarios, share redesignation is a relatively straightforward process. But oversights during the process can quickly escalate into bigger problems, ranging from filing delays to disagreements between shareholders. Here’s what to look out for.

Not checking the articles

Failing to review the articles of association can cause issues with the share redesignation process. If they don’t support what you’re trying to do, the redesignation won’t be valid. Companies using the model articles are especially likely to run into gaps here, since those articles rarely include detailed provisions for multiple share classes.

Letting the SH08 deadline pass

The deadline is one month from the date of redesignation. Late filing is a criminal offence for both the company and its directors under section 636 of the Companies Act 2006, with the potential for escalating fines.

Ignoring the tax angle

Changing who receives what dividend – and in what proportion – has tax consequences.

HMRC takes a close interest in share restructures that appear designed primarily to avoid tax rather than serve a genuine commercial purpose. If tax efficiency is a motivation or you are unsure of your specific circumstances, talk to an accountant or tax adviser before you start.

Not keeping shareholders in the loop

A redesignation that reduces someone’s rights without their understanding or consent is likely to lead to a dispute. Clear, early communication with every affected shareholder is essential – both as a legal requirement where class consent is needed and as basic good practice.

Leaving records half-finished

Updated share certificates, register entries, PSC filings, shareholder agreements – each one of these creates a paper trail that other people will rely on later. Investors, buyers, auditors, and regulators all expect clean records. Gaps invite questions you don’t want to be answering.

Example: Share redesignation in practice

Imagine you’re a company director and shareholder holding 50 ordinary shares. Your business partner also holds 50 issues, making the total shares in issue 100.Your business partner wants to step back. They’ll remain a shareholder and continue receiving dividends, but you both agree that the best route is to redesignate your partner’s shares into a non-voting class. Here’s how it works:

1. You review the articles. They already include provisions for multiple share classes, specifically Class B non-voting shares, and permit redesignation, so no amendment is needed.
2. You draft and pass an ordinary resolution, recording that your partner’s 50 ordinary shares will be converted into 50 Class B non-voting shares.
3. Because the redesignation removes your partner’s voting rights, they need to consent to the change. They do.
4. You update the register of members: 50 ordinary shares in your name, 50 Class B non-voting shares in your partner’s name.
5. Within one month, you file form SH08 at Companies House.
6. Your partner hands back the original certificate and receives a new one for the Class B holding

After the redesignation, your partner still receives their share of the dividends. However, you now hold all the voting power. The company’s total share capital remains unchanged – no new shares were issued, and the nominal value of each share remains the same.

When to seek professional support

Plenty of redesignations are straightforward enough to handle with a good understanding of the process and the right documentation. But some situations call for expert input. Consider speaking to a solicitor, accountant, or specialist company secretary if:

• Tax planning is a significant driver – the dividend and personal tax implications need careful modelling. You should also speak to an accountant if you’re unsure of your position, generally.
• There’s any chance of shareholder disagreement – handling class consent and objection rights correctly is critical
• The redesignation is part of a bigger change – an investment round, a business sale, a merger, or a family succession plan
• The articles need substantial changes – especially if you’re not familiar with drafting or filing amended articles
• Control of the company could change – and you need to understand the full impact on PSC reporting and governance

When in doubt, getting advice early is almost always cheaper than fixing mistakes after the fact.

Get the right share structure for your business

Share redesignation is the mechanism for moving existing shares from one class to another. Whether you’re redistributing voting control, planning for tax-efficient dividends, bringing employees on board, or preparing for an exit, it gives you a way to optimise your share structure as your business grows.7

The process involves confirming that your articles allow the change, passing the necessary resolutions, filing form SH08 within one month, and keeping your internal records up to date. Get those steps right, and share redesignation can be handled efficiently and compliantly.

If you’d like support with your share structure – or any aspect of your company’s ongoing compliance – Quality Company Formations is here to help. From setting up your company professionally at the outset to managing your filings and secretarial duties as you grow, we’ll make sure everything is in order.