Steps to Issue Shares in the UK

If you’re running a company in the UK, you might be thinking about raising capital or bringing in new investors. One of the most common ways to do this is by issuing shares. But how exactly do you go about it? What steps do you need to follow? Don’t worry - I’m here to walk you through the process in a clear, straightforward way.

Let’s dive into the steps to issue shares and make sure you get it right from the start.

Understanding the Steps to Issue Shares

Before you jump in, it’s important to know what you’re dealing with. Issuing shares means creating new ownership stakes in your company. This can be a powerful tool to raise money or reward key people. But it also comes with legal responsibilities.

Here’s a quick overview of the main steps you’ll need to follow:

1. Check your company’s articles of association

2. Decide on the type and number of shares to issue

3. Get approval from your board and shareholders

4. Prepare and file the necessary paperwork

5. Update your company’s registers and notify Companies House

   
   

Each step has its own details and requirements, so let’s break them down.

Discussing company shares issuance

What is meant by issuing shares?

You might be wondering, what exactly does issuing shares mean? Simply put, it’s the process where a company creates and sells new shares to investors or existing shareholders. These shares represent ownership in the company.

When you issue shares, you’re essentially dividing your company into parts and offering those parts to others. This can be done to raise funds, bring in new partners, or reward employees.

Shares can come in different types, like ordinary shares or preference shares, each with its own rights and benefits. Knowing what kind of shares to issue is crucial because it affects control, dividends, and voting rights.

Issuing shares is a formal process governed by UK company law, so it’s important to follow the rules carefully to avoid any legal issues.

Step 1: Check Your Company’s Articles of Association

Your company’s articles of association are like its rulebook. They set out how shares can be issued and what procedures you need to follow. Before you do anything, take a close look at these documents.

• Do the articles allow you to issue new shares?

• Are there any restrictions on who can buy them?

• Is there a pre-emption right, meaning existing shareholders get first dibs on new shares?

  
  

If your articles don’t allow for new shares or have restrictions, you might need to amend them first. This usually requires a special resolution passed by shareholders.

Getting this step right saves you headaches later. If you’re unsure, it’s a good idea to get legal advice to interpret your articles properly.

Step 2: Decide on the Type and Number of Shares to Issue

Next, you need to decide what kind of shares you want to issue and how many. This depends on your company’s goals.

• Ordinary shares are the most common. They usually carry voting rights and dividends.

• Preference shares might give holders priority on dividends but limited voting rights.

• Non-voting shares can be issued if you want to raise capital without diluting control.

  
  

Think about how many shares you want to create and at what price. The price can be nominal (the face value) or higher, depending on your valuation.

For example, if your company has 1,000 shares and you want to raise £10,000, you might issue 1,000 new shares at £10 each.

Remember, issuing too many shares can dilute existing shareholders’ control, so balance is key.

Step 3: Get Approval from Your Board and Shareholders

You can’t just decide to issue shares on your own. The company’s board of directors must approve the decision first. This usually happens in a board meeting where a resolution is passed.

After the board’s approval, you may also need shareholder approval, especially if your articles require it or if you’re issuing a large number of shares.

Make sure to keep proper records of these meetings and resolutions. They’re important legal documents that prove you followed the right process.

Step 4: Prepare and File the Necessary Paperwork

Once you have approval, it’s time to get the paperwork in order. This includes:

• Share allotment letters to the new shareholders

• Updating the register of members to reflect the new shareholdings

• Filing a return of allotment of shares (Form SH01) with Companies House within one month

  
  

Filing Form SH01 is a legal requirement. It tells Companies House about the new shares issued and updates the public record.

Missing this step can lead to penalties or complications down the line, so don’t skip it.

Completing share allotment paperwork

Step 5: Update Your Company’s Registers and Notify Relevant Parties

After filing with Companies House, update your company’s internal records:

• Register of members: Add the new shareholders and their shareholdings.

• Share certificates: Issue certificates to the new shareholders as proof of ownership.

  
  

You should also notify any relevant parties, such as your company secretary or accountants, so everyone is on the same page.

Keeping your records accurate and up to date is essential for compliance and smooth future transactions.

Why Following These Steps Matters

Issuing shares might seem complicated, but following these steps carefully protects your company and shareholders. It ensures you stay compliant with UK law and avoid disputes.

Plus, it builds trust with investors and partners. When everyone knows the process is transparent and fair, it’s easier to grow your business.

If you want to learn more about issuing shares, there are plenty of resources and legal experts who can help guide you.

Ready to Issue Shares? Here’s What to Do Next

Now that you know the steps, it’s time to take action.

Contact our experts today for help and guidance- info@yourlegalteam.org.uk