Transferring and issuing company shares - YouTube

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