Hi there Nicholas Campion here from 1st Formations
here today to talk to you about transferring and
issuing company shares now this video is part of our ongoing whiteboard thursday
series the series where we take a look at all
of the aspects of running a limited company
here in the UK so if you want to keep up to date and find out all there is to
know about forming and administering companies then
hit that subscribe button but for now let's get started
so limited companies can issue more shares at any point after incorporation
likewise shareholders who are also known as company members
can transfer or sell shares to other people at any time
in the cases of both transferring and issuing shares
the correct procedures must be followed in accordance with the provisions as set
out by the companies act 2006 the company's own articles of
association and of course any shareholder agreements
if there are ones in place to start with let's take a look at
how you go about transferring company shares now limited company shares
can be transferred from one person to another in exchange for either a
cash payment or perhaps a non-cash consideration
this will include things like goods services knowledge
or the writing off of debt they can also be transferred as part of an employee
share scheme or they can be transferred to a family
member or spouse as a gift if you wish to transfer shares
after your company is formed you will need to start by completing a stock
transfer form the form will include information such
as your company name and its registration number the quantity
and class of the shares being transferred the name and address of the
existing shareholder which is known as the transferor and
the name and address of the new shareholder
which is also known as the transferee you'll also need to include
the amount paid for the shares as well as details of any non-cash payments that
were included as part of the transaction the signature of the transferor and
transferee in some cases is then required and of course if
there's a stamp duty liability this should also be included
a completed stock transfer form must be delivered to HMRC
if the sale value of the transfer exceeds a thousand pounds
if it does the transferee will be liable to pay stamp duty tax
of 0.5% on that total sale value the transfer must then be approved by
the board of directors either at a meeting or by way of board
resolution for some companies the existing
shareholders may also need to pass a special
resolution to waive their right to pre-emption on the transfer of shares
themselves when the transfer is complete the
directors must provide a copy of the stock transfer form
to both the transferor and the transferee they should also retain their
own copy for their own statutory records which
should be stored at either the registered office
or a SAIL address if they have one the new shareholder
must be issued with a share certificate as proof of ownership
the statutory register of members should be updated to reflect the share transfer
and to record details of the new and the old shareholders
if necessary the register of people with significant control should also be
updated there is no need to immediately notify
companies house when share transfers actually take place
as this can simply be reported on the next annual confirmation statement
when it comes around next let's take a look at the process of
issuing company shares following incorporation companies may be
required to issue new shares for a number of reasons
but the sorts of reasons this might include may be to bring in a new business
partner or to raise additional capital through
outside investors may be for to fund expansion or to pay
for a new project also to pay off business debts or to
issue as part of a bonus scheme for employees
or simply to provide a gift to family members
the Companies Act doesn't impose legal restrictions on the number of shares
that a private company can issue during or after incorporation but it is
possible to include certain restrictions within the articles
and shareholder agreements those restrictions might include things like
authorised share capital pre-emption rights for existing members
and the director's powers to authorise allotments so to issue company shares
the prospective member or members must make an application to the company
existing members will usually then need to waive their
their right to pre-emption and to follow any other provisions as described within
the articles finally the allotment should then be
accepted by the directors or sometimes by the shareholders
dependent on what is actually provided for within the articles
once the allotment has taken place the directors should submit the SH01 form to
Companies House and this form will include things like
the company name and the registration number
the date the allotment took place the name class
currency and nominal value of each of the shares
the amount paid or unpaid for those shares in question
details of any non-cash payments where applicable
a statement of capital the prescribed particulars that's the rights attached
to those shares and finally of course the signature of
the director now listen up because this is important
directors are legally responsible for filing the form SH01 at Companies
House no later than one month after the
allotment has been completed the directors should also provide a
share certificate to each of the new shareholders to
retain copies of share certificates at the company's registered office or
SAIL address to update the statutory register of members and also to
update the people with significant control register if that has also been
impacted by the changes and to report the changes to Companies
House in terms of the shareholdings themselves
using the Confirmation Statement when it's next due
so that's how to transfer and issue shares next let's talk about
the authorised share capital now authorised share capital is an
optional provision that can be included in the articles of association
it essentially limits the number and value
of issued shares that the company may have at any given moment
companies formed before the 1st of October 2009
under the old Companies Act have this provision
automatically included within their memorandum and articles
companies incorporated under the 2006 Act i.e.
after the 1st of October 2009 are free to forego this provision entirely
however they can still include it within their articles
if they so wish so you might be asking yourself
why was the authorised share capital removed as a legal requirement
now simply put authorised share capital became optional
when stamp duty ceased to be payable on authorised capital when companies were
incorporated under the old Act they were required to pay stamp duty
actually on the authorised capital itself
then this authorised capital was stated within the memorandum and articles of
association as a sum of money divided into a
quantity of shares at a fixed value companies weren't
required to issue all of their authorised shares but they
weren't allowed to issue more than the maximum figure as detailed
within that memorandum and articles nowadays
stamp duty on shares is now only payable to HMRC
when the sale of a transfer exceeds a thousand pounds
next we'll need to address the pre-emption rights of existing company
shareholders pre-emption rights are provisions that
provide existing members with the first refusal to any new or existing company
shares that become available the Companies Act
provides default pre-emption rights on the
allotment of shares which can be removed from the articles or waived for
individual transactions by passing a special
resolution while there are no automatic statutory
provisions for pre-emption rights on the transfer of shares
again companies can include that optionally within their articles
pre-emption rights also protect members from unfair dilution
and it enables them to maintain their proportion
and control over a company let's take a quick look at an example of this in
action say you have a company and you own 25% of
the issued shares that means if the company seeks to issue
more shares in the future you must be given the option to purchase
25% of the shares that do become available
you can of course decline to purchase the shares
at which point they'll be offered to outside prospective members
pre-emption rights can also help prevent non-members from joining a company
and potentially harming the status quo or overall mission of the business
finally let's look at the power of directors to transfer
and allot shares so the rights and powers of directors
including the power of transfer and allotment of shares
are outlined in the Companies Act the articles of association
and any service agreement between the company and the directors themselves
that being said members do have the power to alter these rights at any time
by passing a resolution first there's the power of the directors to transfer
company shares now shares transfers can usually be
authorised by the directors themselves as we saw earlier
but due to the impact that the transfers can have on the members beneficial
rights and controlling interests directors are sometimes prohibited
from authorising transfers without the permission of the existing members
when the director doesn't have this power to authorise the transfer of
shares that means that the company members will
need to pass a resolution to either grant that authorisation to the
directors or to permit the transfer on that particular occasion then we've
got the power of the directors to issue company shares the articles
adopted by private limited companies formed after the 1st of October 2009 will
usually permit directors of companies with a single share class
to authorise the allotment of an unlimited amount of ordinary shares
without seeking the approval of the existing members
but it is important to note that this power is still at the discretion of the
members that's because they have the right to
restrict directors powers at any time if they so wish
finally if the directors aren't permitted to authorise an allotment
the shareholders must pass a resolution to approve it
or simply to amend the articles to grant such powers to the directors
and that's it so in today's video we've looked at
how one goes about transferring and issuing company shares
we've also looked at the authorised share capital and the power of directors
to authorise transfers and allotments if
you have any questions please do leave a comment
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thanks for watching and we'll see you next time cheerio