Many times a Limited Company will seek an investor but before it actually consummates that transaction, it increases the number of shares it has available to issue to investors. It is not uncommon for a Limited Company to recapitalize itself with 10 million shares. The proper way to consider this is to place a value on your company which includes your expectations of its profits, your ideas and the influence that you are exerting in making your company a success. Let’s say as a result of this, you value your company at $500,000. You then go out and recapitalize the company with 10 million shares. That would mean each share in the share in the Limited Company has a market value of 5 cents then you would bring investors in at that rate and issue them shares. If a person was investing $10,000 in your corporation, they would receive 200,000 shares. However, during the re-capitalization process and before any shares are issued to an investor, you would want your Limited Company to issue you a share dividend for as much as 60% or 70% of the shares of the Limited Company to yourself. This is a non-taxable transaction and protects you from losing your majority control of the Limited Company. So when we talk about recapitalization, we are also talking about a share dividend.

Desired number of shares for the Limited Company to be recapitalized at: