This article is for Irish startup founders and company directors who are setting up their share structure or preparing for investment rounds.If you're confused about what par value actually means, why most startups use €0.01 shares, or how share premium accounts work, this guide explains the practical implications of par value, common mistakes to avoid, and how these decisions affect future funding rounds.
Key Takeaways
Set par values low (€0.01 or €0.001) to maximize flexibility for future funding rounds and simplify cap table mathematics.
Par value has no connection to market value; it's purely a legal minimum price for issuing shares.
You cannot issue shares below par value under Section 66 of the Companies Act 2014 or directors face personal liability.
Share premium (amount paid above par value) goes into a restricted account but the cash received can be used freely.
Most Irish startups issue founder shares at par value initially to avoid creating an unnecessary share premium account.
What par value should I set for my Irish startup's shares?
Most Irish startups use €0.01 or €0.001 par value to maximize flexibility for future funding rounds. Low par values simplify cap table mathematics and reduce accounting complications that venture capital investors and corporate lawyers prefer to avoid.
Can I issue shares for less than their par value?
No, Section 66 of the Companies Act 2014 prohibits issuing shares below their nominal value. If your shares have €1 par value, you must receive at least €1 per share, which is why setting low par values gives you maximum pricing flexibility.
Does par value affect what my company is actually worth?
No, par value has no connection to your company's market value. Par value is simply a legal construct for accounting purposes, while market value reflects your business's real economic value - a company with €0.01 par value shares could be worth millions if successful.
What is share premium and when does it apply?
Share premium is the difference between par value and the actual price paid when someone buys shares above nominal value. For example, if your shares have €0.01 par value but an investor pays €10 per share, the €9.99 difference goes into a separate share premium account required under Section 71 of the Companies Act 2014.
Can I pay dividends from the share premium account?
No, the share premium account cannot be distributed as dividends under normal circumstances. However, this restriction only applies to the accounting entry, not the cash in your bank account - you can still pay normal dividends from your company's accumulated profits (retained earnings).
What happens to investor money during a funding round?
When an investor pays above par value, the company records the par value amount as share capital and the excess as share premium. All the cash received goes into your bank account and can be used for any legitimate business purpose - the accounting distinction doesn't restrict how you use the funds.
Can I change my company's par value after incorporation?
Yes, but you must follow specific procedures under the Companies Act 2014 to subdivide or consolidate shares. Share subdivision divides existing shares into multiple shares with lower par values, while consolidation combines shares into fewer shares with higher par values - both require board resolutions and filing forms with the Companies Registration Office.
What are the main mistakes to avoid with par value?
Setting par values too high (€1 or more) creates unnecessary restrictions during funding rounds, and creating too few authorized shares means you'll need to amend your constitution before completing funding, adding delays and legal costs. Also, never assume par value equals market value when discussing valuations with investors.
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