This blog will look at the question of ‘How do I issue new shares in my company’ but before we get there, let’s have a quick recap on shares.

Shares in a private limited company have the three following features:

1. They deal with voting rights – they can either be voting or non-voting
2. They deal with dividend rights – they can entitle the holder to a share of profits or not
3. They deal with share of capital – they can entitle the holder to a share of the business on sale or other disposal, or not.

Usually, if you are the only shareholder or the company was set up on a standard basis, it is likely that you will have (say) 1 share, or 100 shares, or whatever number, and that each share are of the same type – or class – such as ORDINARY shares. The name can be anything really but ORDINARY or ORDINARY A Shares are the usual.

Sometimes called Alphabet Shares, this is where shareholders have e.g A Shares, B Shares and C Shares, usually so that dividends can be paid in different amounts to different shareholders.

There are also things like Preferential Shares, which are special shares which, on a sale, disposal or liquidation, ensure that shareholder is paid out before the other shareholders (that is, they are preferred).

And of course, it may be that you are looking at other more complex derivatives of shares, such as Freezer Shares, Growth Shares, Hurdle Shares, Flowering Shares, and all other strangely named shares outside of this particular article.

So what happens if a company wants or needs to issue new shares, eg to a new investor or to an employee (by the way, read our blog on what to do if you’re considering giving shares away).

The Directors of a Company cannot issue or allot shares unless they have authority. Even if you are the only shareholder and director, it technically means that the Shareholders will need to give the directors power to do this by way of a special resolution.

Once a special resolution is passed, the directors can then issue and allot the new shares.

If there is going to be a different class of shares, it is sensible to consider whether new articles are required, or whether a shareholders agreement may be necessary to regulate things. For example, if they are being given to an employee, you may want to retain some control over the shares. However, if they are to a new investor, then there may be different thinking going on.

Let’s say you just want to issue some more of the same shares you have, that your new investor is going to be on an equal footing to you, here’s what you’d do:

1. Have a shareholders/members meeting to discuss and approve a Special Resolution to authorise the directors to issue and allot the shares.
2. Hold a directors meeting to approve the issue and allotment of the new shares.
3. The shares must be paid for on issue.
4. Issue the new shareholder with a share certificate.
5. Update the companies statutory books (if held) or nominate to provide the same to Companies House.
6. File Form SH01 at Companies House to confirm the new shareholding.

That’s pretty easy, really.

The more complicated part is certainly understanding whether you need new articles of association or a shareholders agreement.  The answer is probably yes – see Do I Need A Shareholders Agreement? But if you’re unsure, give Steven a call to discuss.

Issuing and allotment of new shares is relatively painless and not expensive to do. But it is important to ensure that everything has been considered before going ahead and that’s why Steven would recommend you have a free initial and no obligation call with him before going ahead.