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Company Structure Section 3 and management of the company will rest in the hands of a board of directors, ultimate control is with the shareholders. They have the power to appoint and remove the directors. The difference between shareholders and directors is explored in Section 4 – Shareholders and Directors. The control is exercised primarily by the passing of shareholder resolutions. There are two main types, ordinary resolutions and special resolutions. Ordinary resolution passed by shareholders who hold more than 50% of the voting shares. Special resolution passed by the holders of at least 75% of the voting shares and required for certain key matters. Types of shares Whilst the most basic type of share is the ordinary share, a company may issue different classes of shares to which different rights may attach. For example, a company may issue a Preferred Ordinary Share which may carry a right to a preferential dividend or to enhanced voting rights. Holders of Preferred Ordinary Shares may receive a dividend whilst ordinary shareholders may not.(There is further detail on the payment of dividends in Section 4 – Shareholders and Directors). A description of the different sorts of rights which can attach to shares is, however, outside the scope of this Guide. It tends not to be too much of an issue at the spin-out stage where the key is to keep the structure straightforward. Be aware, however, that as the company grows and looks to external investors for further loans, such investors are likely to demand various preferential rights for the shares that they will be acquiring. You may, for example, be able to negotiate a loan or overdraft facility from a bank, which will satisfy the funding requirements of the company without having to give away any of the shares to outside investors. The commercial reality, however, is that banks are usually reluctant to lend significant sums to such start-up ventures, particularly where the spin-out company may not own any significant assets over which the bank can take security for its loan. 16