{"id":1021,"date":"2021-12-29T04:42:45","date_gmt":"2021-12-29T04:42:45","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=1021"},"modified":"2025-07-02T00:42:24","modified_gmt":"2025-07-01T23:42:24","slug":"issue-shares-limited-company","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/issue-shares-limited-company\/","title":{"rendered":"How to Issue Shares for a Limited Company in England and Wales"},"content":{"rendered":"

As the sole shareholder and director for a private company, you may decide that it is time to enter the next stage of your business. Likewise, you may be interested in raising equity from an outside investor. Generally, an investor will wish to get a cut of your company\u2019s growth in exchange for giving some money. This article will first describe the difference between a share issue and a share transfer and then explain the steps you need to take to issue new shares.<\/span><\/p>\n

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Note: this article assumes your company has incorporated under the <\/span>Companies Act 2006<\/span><\/i>.\u00a0<\/span><\/p>\n<\/div>\n

Share Issue vs Share Transfer<\/span><\/h2>\n

It is essential to understand the difference between a share issue and a share transfer, because both are common transactions but have different implications.<\/span><\/p>\n\n\n

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Let us say you have a company, YouCo Ltd. When you incorporated the company, you issued yourself 100 shares. The company is currently worth \u00a310,000.<\/span><\/p>\n

Consider two different scenarios:<\/span><\/p>\n

(a)<\/span> Your brother offers you \u00a310,000 in exchange for equal ownership in YouCo Ltd; in exchange, your company issues new shares; and<\/span><\/p>\n

(b)<\/span> \u00a0 <\/span>Your sister has asked to purchase 25% of your company; you transfer your sister 25 of your own shares to her, and she gives you \u00a32,500.<\/span><\/p>\n<\/div>\n\n\n

The first is an example of a share issue \u2014 also called a \u201cshare allotment\u201d \u2014 because new shares are created and your company will issue them (\u201can allotment\u201d).<\/span><\/p>\n

In the second, no new shares are created. Instead, you transfer ownership of shares already in existence to a different person.\u00a0<\/span><\/p>\n

In (a) the share issue, YouCo Ltd has become twice as valuable because your brother contributed \u00a310,000 and, in exchange, you issued twice as many shares as were already in existence. However, in (b) the share transfer, the value of YouCo Ltd stayed the same because your sister paid you directly (not YouCo Ltd).<\/span><\/p>\n

In both scenarios, your ownership in YouCo became \u201cdiluted\u201d, but this dilution happened in two different ways.<\/span><\/p>\n

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As you can see, share issues are usually reserved for raising equity finance. Share transfers are private transactions between two persons which does not typically change the value of the company.<\/span><\/p>\n<\/div>\n

\u00a0<\/span>For the rest of the article, we will consider share issues only.<\/span><\/p>\n

How to Issue New Shares<\/span><\/h2>\n

Once you decide to issue new shares in exchange for cash or other assets, it is important to obtain a valuation from an accountant or banker. A professional can advise you concerning number of shares you need to allot and at what market price. Additionally, there is a formal process you must follow.<\/span><\/p>\n

Check Your Company\u2019s Articles of Association\u00a0<\/span><\/h3>\n

First, check with your company\u2019s articles of association to ensure that you have the authority to issue (\u201callot\u201d) further shares. Articles of association are the documents that set out the rules of the company and how it is to be run.\u00a0<\/span><\/p>\n

If you have a single class of shares and you have adopted the model articles of association, which is the default option when you incorporated your company, you will not need to obtain the consent of your company\u2019s shareholders.<\/span><\/p>\n

If, on the other hand, you are issuing shares<\/a> of a different class, you will need to obtain the permission of your shareholders. For most companies, such as those using the model articles, an ordinary resolution authorising you as the director to issue the new class of shares will be sufficient.<\/span><\/p>\n

Pre-Emption Rights<\/span><\/h3>\n

As a director, you have an obligation to ensure shareholders have exercised their pre-emption rights. This simply means that you have offered each existing shareholder the option to purchase additional stock to preserve their percentage of ownership in the company.<\/span><\/p>\n\n\n

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As an example, say YouCo Ltd has two shareholders and you are the only director:<\/span><\/p>\n