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Letter shares (shares A, B, C) are shares of different classes with mutually differing rights. The law does not formally recognize the term “letter share”—it is the common name for what is legally referred to as “shares of different classes” (Article 2:201 of the Dutch Civil Code). Since the Flex-BV Act (2012), you can freely regulate in the articles of association which rights each class receives: different voting rights, different dividend rights, different meeting rights, and different transfer restrictions. This is practically useful when there are multiple classes of shareholders.
Bram and Joris once thought they needed just one type of share. However, once an external investor came on board with different terms—priority on dividends, veto power on sales—letter shares were put on the table after all. Not complicated, but something to arrange properly in advance.
The short answer
Letter shares are shares of different types within a single private limited company (BV), designated by letters (A, B, C, sometimes also P for preferred shares). Each type has its own statutory rights: voting, dividends, meetings, and transfer. Widely used for:
- Different classes of founders (founders A versus later employees with shares B).
- Investors with different terms than founders (A founders, B investors with cumulative preference shares).
- Employee participation without control (C shares without voting rights).
- Family holding structures with a distinction between generations.
What do you arrange per type?
The statutes stipulate for each type:
- Voting rights. One vote per share, no vote, or a weighted vote.
- Profit entitlement. Fixed amount, percentage, residual — varying by type.
- Liquidation law. Order and amount upon dissolution of the BV.
- Right to attend meetings. Right to attend meetings, even without voting rights.
- Blocking arrangement. Obligation to offer for sale or not upon sale.
- Conversion rights. Sometimes conversion from one species to another is possible.
For each category, the rights must be objectively defined — no “the board decides” without a framework. A judge reviews.
Practical examples
Example 1 — Two founders + investor:
- A-shares (founders): 50% of the capital, ordinary voting rights, residual profit rights.
- B-shares (investor): 50% of the capital, ordinary voting rights, cumulative preferred dividend of e.g. 5%, veto right on sale.
Example 2 — Family holding company with generations:
- A-shares (father): 80%, voting rights, pro rata dividend.
- B-shares (children): 20%, no voting rights, pro rata dividend rights.
Example 3 — Employee participation:
- A-shares (founders): full voting rights, full profit rights.
- C-shares (employees): no voting rights, dividends only, and pro rata capital.
At incorporation or introduce later?
Two options:
- At incorporation. Immediately specify multiple classes of shares in the articles of association, even if you are currently only issuing A shares. Makes the subsequent issuance of B shares easier.
- Later. An amendment to the articles of association is required to create new varieties. Costs €400 – €750. Not disastrous, but it does mean an extra visit to the notary.
For growth plans with investors: arrange this at incorporation. For a one-person BV: usually not necessary. For an amendment to the articles of association, see amendment to BV articles of association.
How much does it cost?
- For incorporation with multiple types: usually €100 – €300 extra on top of the standard, for drafting the amended articles of association.
- Amendment of Articles of Association to add species: € 400 – € 750.
- Share issuance of a new type: notarial deed (costs vary).
The legal preparation required by a lawyer (agreements prior to the articles of association) increases for more complex structures. See what is a shareholders' agreement for the additional agreements you may want to arrange in this regard.
Honest recommendation
For a typical one-person BV, letter shares are overkill. For BVs with multiple founders, investors, or employee participation, it is almost always worthwhile — it often differs between “we have a workable structure” and “we are stuck with an amendment to the articles of association in year two.” Discuss with a lawyer in advance which types and rights suit your situation.
For the broader context: this is how shares in a BV work.
Frequently Asked Questions
Shares of different classes within a single private limited company (BV), designated by letters (A, B, C, sometimes P for preferred shares). Each class has its own statutory rights regarding voting, dividends, meetings, and transfer. Legally, this is referred to as “shares of different classes” (Article 2:201 of the Dutch Civil Code).
In the case of multiple classes of shareholders with different conditions: founders versus investors, employee participation without control, family holding with a generational divide, or joint venture partners with differing rights.
Voting rights (full, none, or weighted), profit rights (fixed, percentage, residual), liquidation rights, meeting rights (also possible without voting rights), blocking provisions, and any conversion rights. For each type, the rights must be stated objectively in the articles of association.
Yes, via an amendment to the articles of association at a notary. Costs €400 – €750. It is smarter to specify multiple types in the articles of association at the time of incorporation, even if you currently only issue A-classes — that saves an amendment later.
Shareholding itself is tax-neutral. However, the nature of the shares (cumprefs, non-profit rights) can be relevant for valuation upon transfer or for substantial interest (5% threshold in Box 2). Discuss this with an accountant in advance.
Almost always. Letter shares only regulate statutory rights; practical arrangements (vesting, leaver schemes, deadlock) belong in a shareholders' agreement. This is especially important when there are multiple classes.
At incorporation, €100 – €300 extra on top of standard articles of association. Via a subsequent amendment to the articles of association, €400 – €750. A shareholders' agreement and legal advice are added on top — count on a total investment of €750 – €2,500 for a sound structure.
