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If you’re running a company, one of the most important things you’ll want to understand is how shares work.
For some companies, shares will be allocated evenly among owners, while in other cases the division of shares means that some owners hold a larger stake than others.
A common question in this situation is, “How many shares can a company have?”
In this article, we’ll go through the answer. But first, let’s consider how shares actually work.
How Do Shares Work In A Private Company?
When a company is set up, the capital is divided into shares – each share representing a unit of ownership. Under the updated provisions of the Corporations Act 2001 (as applicable in 2025), these shares form the basis on which ownership, profit distribution, and voting rights are calculated.
Shares can be owned by individuals or legal entities (such as another company or a trust), and they can also be jointly owned by more than one person. There are two common ways in which a person or entity can acquire shares.
Firstly, they may acquire shares through a share issue. This occurs when a company creates new shares – typically at incorporation or at later stages when additional investment is required – and allot them in exchange for capital. For more on this process, see our detailed guide on the process for issuing shares.
Secondly, shares may be acquired through a share sale. In this scenario, an existing shareholder sells their shares to a third party. The parties would then document the transaction in a Share Sale Agreement to ensure all details are recorded in writing.
Owning shares in a company gives individuals or entities certain rights. These rights are determined by the Company Constitution and any Shareholders Agreement in place. Typically, share ownership not only entitles the holder to a proportionate share of the profits or proceeds from a sale or acquisition, but also confers the right to vote on key corporate decisions – usually in line with the percentage of ownership.
How Many Shares Can A Company Have?
The exact number of shares a company has is determined at its inception and can be adjusted over time. What really matters is not the sheer number of shares issued, but the percentage ownership each shareholder holds. It’s up to each company to decide how many shares it wants to have. For example, many small businesses opt to issue 12 shares or a multiple thereof (such as 1,200 shares) because these numbers are easily divisible into halves, quarters, or other fractions. In contrast, startup businesses aiming to attract a larger base of investors might issue a far greater number – sometimes 1 million or even 10 million shares – to allow for more flexibility in creating different tiers of equity.
If a company starts with a lower number of shares but later needs more granularity for equity division among new shareholders, it can opt for a share split. In a share split, the overall number of shares increases proportionally (for example, a 10x share split turns 10 shares into 100, making it easier to allocate smaller percentage stakes).
While there is no statutory limit on the total number of shares a company can issue, private companies are generally restricted to no more than 50 shareholders, in accordance with current Australian corporate regulations.
How To Issue Shares
The method a company uses to issue shares depends on its governing documents and the requirements of the Corporations Act 2001. Typically, the Company Constitution will outline the process for issuing shares. Where the Constitution is silent or its provisions are not applicable, the rules and procedures set out in the Act will govern share issuances.
Can Directors Also Be Shareholders?
We’ve discussed how many shareholders a company might have, but another common query is whether directors can also be shareholders.
The simple answer is yes – a director can also be a shareholder, provided that this dual role is clearly addressed in the company’s governing documents.
Do I Need A Shareholders Agreement?
If you’re issuing shares in a company with more than one shareholder, we strongly recommend putting a Shareholders Agreement in place. This essential document outlines the rights and responsibilities of shareholders, sets out the process for any future share transfers, and details mechanisms for dispute resolution. For further clarity on these matters, take a look at our resource on governing documents.
As we approach 2025, many companies are leveraging digital platforms to manage share registers and equity distribution. This modern approach not only streamlines record-keeping but also ensures compliance with the most recent updates to the Corporations Act. Digital share certificates and online cap table management tools are becoming industry standard, offering enhanced transparency and flexibility when issuing new shares or conducting share splits. For more insights on staying current with legal and operational changes in the corporate world, our business legal guide is an invaluable resource.
Key Takeaways
In general, there is no statutory limit to the number of shares a company can have-the decision on how many to issue depends largely on the desired flexibility for dividing ownership among shareholders. Whether you opt for a small number for simplicity or millions for greater granularity, ensure that the chosen figure aligns with your company’s long-term goals and funding strategies. Always refer to your governing documents and the latest version of the Corporations Act 2001 (as updated for 2025) to maintain proper compliance.
If you would like a consultation on managing shares in your company, you can chat with our Corporate Lawyers to discuss your options. Alternatively, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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