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Frequently Asked Questions:
Issuing shares involves creating and allocating new shares to individuals or entities, thereby granting them ownership stakes in the company. This process can raise capital, reward employees, or bring in new investors.
Companies can issue various classes of shares, including:
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Ordinary Shares: These are standard shares with voting rights and potential dividends.
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Preference Shares: These shares typically provide fixed dividends and have priority over ordinary shares in dividend payments and asset distribution upon liquidation.
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Redeemable Shares: Shares that the company can buy back at a future date under specific conditions.
The specific rights attached to each share class should be detailed in the company’s articles of association.
The typical process includes:
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Authorization: Ensure directors have the authority to issue shares, as per the company’s articles or shareholder resolution.
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Pre-emption Rights: Offer new shares to existing shareholders first, unless these rights have been disapplied.
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Allotment: Allocate shares to subscribers and record their details.
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Filing: Submit a ‘Return of Allotment of Shares’ (Form SH01) to Companies House within one month of the allotment.
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Register Update: Update the company’s register of members and issue share certificates to new shareholders.
The authority to issue new shares typically resides with the company’s board of directors. However, directors must be authorized either by the company’s articles of association or through a resolution passed by the shareholders.
Pre-emption rights give existing shareholders the first opportunity to purchase new shares in proportion to their current holdings, protecting them from dilution of their ownership percentage. Companies can disapply these rights through a special resolution, allowing new shares to be offered to external investors.
Yes, companies must comply with the Companies Act 2006 and, if applicable, the UK Listing Rules. For instance, public companies must adhere to specific regulations when offering shares to the public, including prospectus requirements and adherence to the UK Corporate Governance Code.
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