How to issue new shares in a Uk limited company
2 June, 2021
In this post we will look trhough how to issue new shares in a Uk limited company.
The procedure to issue new company shares is not compliacted, but requires a lot of compliance obligations.
Before issuing shares in your Limited Company, we would advise seeking professional advice to ensure that you have considered the tax implications, in particular Capital Gains Tax.
In order to issue shares, you have to perform the following preliminary checks:
Your company is incorporated under the Companies Act 2006.
You have to do this check because, if the company was formed under the Companies Act 1985 then you may well find that the company’s articles limit the amount of share capital that can be issued.
There is no restriction in your articles of association for directors to allot shares on the company’s behalf.
Precisely what do you have to check is the absence of pre-emption rights of existing shareholders. Anyone issuing share capital should also check both the articles and any shareholders agreement to determine whether the existing shareholders have pre-emptive rights to purchase any new shares issued.
If there are any such rights, these may need to be amended via a special resolution.
If these rights exist and are not waived, then the existing shareholders will be able to purchase any new shares in the same proportion as their existing shareholding.
There is only one class of shares following the allotment.
The new shares will have the same rights as the previous ones.
THE PROCESS TO ISSUE NEW SHARES IN THIS CASE WOULD BE AS FOLLOWS:
- Hold a board meeting and record in the minutes stating “the board has resolved to allot the shares”. You should state the number and class of shares, the allottees, the price paid & when this took place. These should be kept for ten years.
- Issue share certificates to the new shareholders, click here for a share certificate template.
- Complete the Companies House SH01 form (statement of capital). The form must be filed with Companies House within one month of the allotment of the shares, click here to do so.
- Amend the company’s statutory register of members which the company (or your accountant) maintains.
- Include the new shareholders must be included in the company’s next Confirmation Statement (which replaced the annual return from 30 June 2016)
- Show the new shares issued within the company’s accounts, increasing the level of shareholders’ funds shown in the balance sheet.