Issue of shares resolution

The shareholding structure of your business details the people who own your business and how much of your business they own. For example, if a company has two shareholders owning 50% of the shares each, they are entitled to an equal distribution of the profits the business makes after corporation tax on that profit has been paid.

Companies issue new shares for many different reasons including:

• to reflect the level of personal investment in a business at the outset and any personal investment made later on,
• to attract new directors and investors as compensation for their labour or monetary investment.
• to repay company borrowings, and
• to distribute to members of staff to encouragement involvement and loyalty.

For help and advice on issuing shares, please call us on +44 (0) 207 689 7888 or email us at [email protected].

Issue of shares – how our service works

New shareholder application letters

Prior to the issuance of new shares, we recommend that the would-be shareholder must write to the company agreeing to take the shares in accordance with the constitution and Articles of the company.

Special resolution preparation

If a company wishes to issue additional shares to a new shareholder, all existing shareholders within the company must pass a special board resolution to that effect.

Completion of board minutes documentation

There should be the recorded minutes from a board meeting where approval to issue the shares is approved.

Return of Allotment Shares Form SH01

The SH01 form must be completed and submitted to Companies House within 30 days of the issuance of the new shares otherwise all officers of the company will be in “default” under the Companies Act 2016. A confirmation statement will be completed to update Companies House with the latest share capital and share holding.

Certificates demonstrating new company share owner

We also prepare the required certificates indicating the new revised share structure of your business including the names and stakes of each individual shareholder.

Issue of shares – frequently asked questions

How long does it take to issue new shares?

When we receive your order, we prepare form SH01 on your behalf and then we submit it to Companies House. We also prepare the complex documentation required for the issuance of shares at the same time.

You will then receive an email from us and that email will contain your share certificates, meeting minutes, application letter, and board resolution. You need to sign and return the special resolution to Your Company Formations. Once we have that, we submit it to Companies House so that the new shareholding structure is successfully reported and recorded.

Issue of shares – accounting factors you need to be aware of

There are accounting factors to consider if you carry out an…

• issue of shares at a premium,
• issue of shares at a discount, or
• issue of shares to employees

Please consult with an accountant prior to taking any course of action on the tax implications of any decision you wish to make.

What are pre-emption rights?

When existing directors pass the special board resolution to issue new shares, that resolution must approve the increase in the issued share capital and put aside pre-emption rights by a majority of 75% or more. Pre-emption rights are often written into a company’s Articles to limit the number of shares that can be issued or to give existing shareholders first refusal on new shares being issued.

What effect does the issuance of new shares to a new shareholder have on existing shareholders?

Existing shareholders’ stakes in the business are diluted by the issuance of new shares to a new shareholder.

Does the new shareholder need to pay for the shares?

At some point, yes. The shareholder must, at some point, pay the market value of the shares at the time the new shares are transferred to them. The new shareholder will often make this payment in advance. However, the new shareholder may also choose, at the board’s discretion, to make no payment or not make full payment at the outset. If this is the case, they will normally be required to pay what is owed at an agreed point in the future (including by instalments).

What is stamp duty?

You don’t have to pay stamp duty when you subscribe to a new issue of shares in a limited company.

Will Companies House change the details about my company on their website straight away?

You are legally required to inform Companies House within 30 days of the issuance of new shares in your business and of the new share ownership structure within your business. You do this with a confirmation statement however, until this is lodged, the change in the share ownership of your business will not be registered at Companies House nor will it be displayed on their website.

Can I do this myself?

It is possible to issue new shares but we would generally advice company directors and shareholders without a legal or accounting background not to do so because of the complexity involved in the process.

What help can you provide?

As part of Your Company Formations’ commitment to client care, we invite you to contact our experts by phone or email with any questions or concerns you have before, during, and after the issuance of the new shares in your company.