How to issue new shares in a limited company

Issuing new shares in a limited company involves several steps, which are outlined below:

Pre-requisites:

1. Ensure that the company's articles of association allow for the issue of new shares.
2. Check the company's share capital is sufficient to issue new shares.
3. Ensure that the company has sufficient funds to issue new shares.

Step 1: Prepare the necessary documents

1. Share certificate: Prepare a share certificate for each new shareholder, which includes the shareholder's name, address, number of shares, and class of shares.
2. Share allotment resolution: Pass a resolution at a board meeting or general meeting to allot new shares to the new shareholders.
3. Share issue letter: Prepare a letter to the new shareholders, which includes the details of the shares being issued, the issue price, and any other relevant terms and conditions.

Step 2: Determine the issue price

1. Determine the issue price: Decide on the issue price of the new shares, which can be:
   • At a premium (above the nominal value of the shares)
   • At a discount (below the nominal value of the shares)
   • At par (at the nominal value of the shares)
2. Consider the company's financial situation: Ensure that the issue price is reasonable and reflects the company's financial situation.

Step 3: Issue the new shares

1. Register the new shares: Register the new shares in the company's register of members (also known as the share register).
2. Issue the share certificates: Issue the share certificates to the new shareholders.
3. Update the company's records: Update the company's records, including the share capital, to reflect the issue of new shares.

Step 4: Notify HMRC and Companies House

1. Notify HMRC: Notify HMRC of the issue of new shares, which may affect the company's corporation tax liability.
2. Notify Companies House: Notify Companies House of the issue of new shares, which will update the company's public record.

Additional considerations:

1. Shareholder approval: Ensure that the new shares are approved by the existing shareholders, if required by the company's articles of association.
2. Valuation: Ensure that the issue price of the new shares is reasonable and reflects the company's financial situation.
3. Tax implications: Consider the tax implications of issuing new shares, including the potential impact on the company's corporation tax liability.

Example of a share issue process:

Suppose a limited company, XYZ Ltd, wants to issue 1,000 new shares to a new shareholder, John Smith. The company's articles of association allow for the issue of new shares, and the company has sufficient funds to issue the new shares.

Step 1: Prepare the necessary documents

• Prepare a share certificate for John Smith, which includes his name, address, and the details of the shares being issued.
• Pass a resolution at a board meeting to allot the new shares to John Smith.
• Prepare a share issue letter to John Smith, which includes the details of the shares being issued, the issue price, and any other relevant terms and conditions.

Step 2: Determine the issue price

• Determine the issue price of the new shares, which is £1 per share.
• Consider the company's financial situation and ensure that the issue price is reasonable.

Step 3: Issue the new shares

• Register the new shares in the company's register of members.
• Issue the share certificate to John Smith.
• Update the company's records to reflect the issue of new shares.

Step 4: Notify HMRC and Companies House

• Notify HMRC of the issue of new shares, which may affect the company's corporation tax liability.
• Notify Companies House of the issue of new shares, which will update the company's public record.

By following these steps, XYZ Ltd can issue new shares to John Smith and update its records accordingly.