How to Issue New Shares in a Limited Company
Starting a company is only the beginning of your business journey. As your business grows, you may decide to bring in investors, reward key team members, or raise additional capital. One of the most common ways to do this is by issuing new shares after the company has already been formed.
If you’re new to company management, the process can seem technical at first. However, when broken down into clear steps, issuing shares is a straightforward and manageable process.
What does it mean to issue new shares?
Shares represent ownership in a company. When someone owns shares, they own a portion of the business and may have rights such as voting on company decisions or receiving dividends.
When a company is first incorporated, founders usually issue the initial shares to themselves or early partners. Later on, the company can create and allocate additional shares to new or existing shareholders. This is known as issuing shares after company formation.
Why companies issue additional shares?
There are several reasons a business may decide to issue more shares after it has already been established. Some of the most common include:
• Raising funds to grow the business
• Bringing in new investors or business partners
• Offering shares to employees as incentives
• Adjusting the ownership structure of the company
• Supporting business expansion or new projects
For many companies, issuing shares can be a flexible way to access funding without taking on loans or debt.
How to issue New Shares in a company: Step by step
Step 1- check your company's articles of associationReview
Before issuing any new shares, it’s important to review your company’s articles of association. These documents outline the rules that govern how the company operates, including how shares can be issued.
You should confirm:
• How many shares the company is allowed to issue
• Whether there are different classes of shares
• If there are any restrictions on issuing new shares
If the company has already issued most of its available shares, you may need shareholder approval to expand the share structure.
Step 2- Check the directors' authority to allot shares
Get Approval From The Directors
In most cases, the company’s directors must formally approve the issue of new shares. This is usually done through a board resolution. This is simply a written decision confirming that the directors agree to the share issuance.
The resolution will normally specify:
• The number of shares being issued
• The price per share
• The name of the new shareholders
• The class of shares being issued
This step ensures the decision is properly documented and legally authorised.
Step3 - Check pre-emptive rights
Offer Shares To Existing Shareholders
Under the UK Companies Act 2006, statutory pre-emption rights normally apply to new shares issued for cash, unless they are disapplied by shareholders. This means they must be given the opportunity to buy the new shares before they are offered to someone outside the company.
The purpose of this rule is to protect shareholders from having their ownership percentage diluted without being given a chance to maintain their stake in the business.
If existing shareholders decline the offer, the company can issue the shares to new investors.
Step 4 - Agree the terms of the share issue
This will normally include deciding:
- How many shares will be issued
- The class of shares
- The nominal value of each share
- The price paid for each share
- Who will receive the shares
- The rights attached to the shares
Step 5 - Receive Payment or other consideration
Receive Payment For The Shares
Once their shares have been approved and allocated, the new shareholders will need to pay for them.
Payment is most commonly made in cash, but in some situations, shares can be issued in exchange for other contributions, such as:
• Business assets
• Intellectual property
• Services or expertise (depending on the applicable company law)
• It’s important for the company to keep clear records confirming that payment for the shares has been received
Step 6 - Allot the new shares
Issue Share Certificates
After payment is completed, the company usually issues share certificates to the new shareholders. These certificates act as official proof of ownership in the company.
A typical share certificate will include:
• The shareholder’s name
• The number of shares they own
• The share class
• The certificate number
• The date the shares were issued
Some modern companies also use digital share registers instead of physical certificates.
Step 7 - Update the company's register of members
Update The Company’s Records
Whenever shares are issued, the company must update its internal records. This ensures that ownership information is accurate and up to date.
The records include:
- The register of members
- The share capital information
- The company's shareholding records
- The company's capitalisation table
- Records of share allotments
- Any relevant shareholder agreements
Step 8 - Issue Share Certificates
The company should also arrange for share certificates to be issued to the new shareholders.
A share certificate provides evidence of the shareholder's title to the shares and will generally include information such as:
- The shareholder's name
- The number of shares held
- The class of shares
- The company's name
- The certificate number
- The date of issue
Companies should ensure that their share certificates and internal records are consistent with one another.
Step 9 - File Form SH01 with Companies House
Notify The Relevant Authorities
Depending on where your company is registered, you may need to inform the corporate registry about the new shares.
For example, companies registered in the UK must usually submit a Return of Allotment of Shares this is known as Form SH01 and this return is to be submitted within one month of allotment to the registrar within a specific time frame. This filing provides details about the number of shares issued and the shareholders receiving them.
Submitting the required forms on time helps ensure your company remains fully compliant.
Final thoughts
Issuing shares after company formation is a normal and often essential part of growing a business. Whether you’re bringing in new investors, rewarding employees, or raising capital, the process allows your company to expand while adjusting its ownership structure.
By following the correct steps and reviewing company documents, obtaining approvals, issuing certificates and updating official records, you can complete the process smoothly and confidently.
If you’re unsure about any part of the process, consulting with a corporate advisor or company formation specialist can help ensure everything is handled correctly and efficiently.
