When Does a UK Company Need to Allot New Shares?

The short answer: when does a UK company need to allot new shares?

A UK limited company needs to allot new shares when it is creating additional shares that did not previously exist in someone’s name. The company may do this to bring in investment, give a founder or employee an ownership stake, satisfy an agreed share subscription, or alter the balance of ownership between shareholders.

An allotment is different from a transfer. In a transfer, one existing shareholder sells or gives shares they already own to another person. The company’s total number of issued shares stays the same. In an allotment, the company issues new shares, so the number of shares in issue increases.

Before treating a transaction as an allotment, check the company’s articles of association, current share capital, register of members and any shareholder agreement. These documents help establish whether new shares are actually required and whether the proposed process is permitted.

• Use an allotment when the company is creating additional issued shares.
• Use a transfer when existing shares are changing hands.
• Do not assume a new investor always requires new shares; they may buy shares from an existing holder instead.
• Consider the effect on voting rights, dividends and control before proceeding.

Common situations where new shares are allotted

A straightforward example is a company with 100 ordinary shares held by one founder that wants to give an investor a 20% stake after investment. The company might allot 25 new ordinary shares to the investor. The founder would then hold 100 of 125 shares, while the investor would hold 25 of 125 shares. The intended percentage should be calculated carefully before documents are prepared.

Other situations are less obvious. A company may allot shares when a co-founder joins after incorporation, when shares are issued under an employee share arrangement, when an investor converts a convertible instrument into shares, or when the company raises further funding from existing shareholders.

The company should also consider whether it needs a new class of shares, rather than simply more ordinary shares. Different share classes can carry different rights to votes, dividends or capital on a winding-up. Creating or changing class rights can add complexity and should be reviewed carefully against the articles and professional advice where appropriate.

• Raising money directly for the company from an investor.
• Adding a founder, adviser or employee as a shareholder.
• Implementing an agreed share subscription.
• Converting rights into shares under existing investment documents.
• Issuing further shares to support an acquisition or restructuring.

Check whether the directors have authority to allot

The directors should not simply issue shares because everyone agrees informally. They need to establish that they have authority to allot. For many private companies with one class of shares, authority may arise automatically under the Companies Act 2006, unless the articles restrict it. In other companies, the shareholders may need to pass an ordinary resolution granting directors authority to allot shares.

The wording and limits matter. An authority may specify a maximum number of shares, an expiry date, particular share classes or a specific transaction. Check whether the planned allotment falls within those limits before the board approves it.

The articles may impose additional requirements, such as shareholder consent, prescribed notice periods or restrictions on particular share classes. A shareholders’ agreement can also contain contractual approval rights. If documents conflict or are unclear, it is sensible to pause and obtain appropriate qualified legal or company-secretarial support.

• Review the articles of association.
• Check any shareholder agreement or investment agreement.
• Confirm the current number and classes of issued shares.
• Identify the directors’ authority and its limits.
• Record the decision through properly convened board and, where needed, shareholder approvals.

Consider pre-emption rights before offering shares

Issuing shares for cash can trigger pre-emption rights. In broad terms, these rights may require the company to offer new shares to existing shareholders first, in proportion to their existing holdings, before offering them to an outside investor.

Pre-emption rights can arise under the Companies Act, the articles or a shareholders’ agreement. They may be disapplied or varied in some circumstances, often through the correct shareholder resolution or provisions in the articles. The required process depends on the company’s documents and the type of allotment.

This is an important stage because an allotment that appears commercially sensible can still upset ownership expectations if existing holders have not been offered their rights or have not agreed to waive them. Keep clear evidence of offers, waivers, consents and resolutions.

• Establish whether the shares are being issued for cash.
• Check statutory and contractual pre-emption provisions.
• Calculate any pro-rata offers accurately.
• Document shareholder waivers or disapplication approvals where applicable.
• Retain signed subscription or investment paperwork.

Decide the share terms and subscription details

Before completing the allotment, the company should agree exactly what is being issued. This includes the number of shares, share class, nominal value, amount paid or unpaid, issue price, allottee’s full details and the date of allotment. A share can be issued at a premium, meaning the subscriber pays more than its nominal value, but the company’s records need to show the position correctly.

For example, if a company allots 10 ordinary shares with a nominal value of £1 each for £100 per share, its share capital and any share premium should be reflected correctly in its internal records and accounts. This is an area where the company’s accountant can help explain the accounting treatment.

If payment is not cash, such as services, assets or intellectual property, additional rules and valuation issues may arise. Do not assume a simple subscription form is enough in every case. Ask an appropriate qualified professional to review the arrangements where the consideration is unusual or material.

• Number and class of shares.
• Nominal value and issue price.
• Whether shares are fully or partly paid.
• Name and address of each allottee.
• Payment method and evidence of payment or other consideration.
• The agreed allotment date.

Complete the records and Companies House filing

Once the relevant approvals are in place and the shares are allotted, update the company’s statutory registers promptly. This normally includes the register of members and records of shareholdings. The company should issue or update share certificates where required, and keep board minutes, resolutions, subscription documents and any waivers together in its company records.

Companies House generally needs to be told about an allotment using form SH01, usually within one month of the allotment. The form records the changes in share capital and provides a statement of capital. Filing late or with inconsistent figures can create avoidable problems when the company later seeks investment, sells shares or files its confirmation statement.

An allotment can also affect the people with significant control information, particularly where someone crosses or falls below a relevant ownership or voting threshold. Review the PSC position and any required updates. Companies House processes and identity-verification requirements can change, so verify current filing and register requirements using official guidance before submitting documents.

• Pass and save board minutes and shareholder resolutions.
• Update the register of members and relevant internal registers.
• Prepare share certificates where applicable.
• File form SH01 within the applicable deadline.
• Review the statement of capital for accuracy.
• Check whether PSC information needs updating.
• Keep a complete audit trail of approvals and subscription documents.

A practical allotment checklist before you issue shares

The safest approach is to treat a share allotment as a coordinated administrative process rather than a single Companies House filing. Work through the transaction in order, and make sure the numbers on every document match. In particular, compare the register of members, the cap table, resolutions, subscription documents, certificates and SH01 before filing.

If the company is issuing shares during an investment round, give enough time for approvals and document checks before money is accepted or ownership is announced. Clear Corporate Services can help companies organise company-secretarial records and administrative filings, but legal, tax and accounting implications should be checked with suitably qualified professionals where needed.

• Confirm this is an allotment, not a transfer.
• Check the articles, shareholder agreement and existing capital structure.
• Verify director authority and any shareholder approval needed.
• Address pre-emption rights or obtain valid waivers or disapplication.
• Agree the share class, quantity, price and payment terms.
• Approve and document the allotment.
• Update registers, certificates and the ownership cap table.
• File the required Companies House information and review PSC changes.
• Verify current official requirements if the rules or filing process may have changed.

Where to check and what to do next

For current official requirements, consult GOV.UK guidance. Requirements depend on your circumstances and can change. This article is general information, not legal, tax or accounting advice.

If you need help with the administrative steps, see our Shares & Ownership service or contact Clear Corporate Services.