Limited companies can issue more shares at any point after incorporation. Likewise, shareholders (members) can transfer or sell their company shares to other people at any time.
In both situations, the procedures must be in accordance with the provisions set out in the Companies Act 2006, the articles of association, and the shareholders’ agreement (if applicable).
How to transfer company shares
Limited company shares can be transferred from one person to another in exchange for:
- a cash payment
- a non-cash consideration such as goods, services, knowledge, or writing off debts
- as part of an employee share scheme
- as a gift to a family member or spouse
If you wish to transfer or sell shares after company formation, you should begin by completing a Stock Transfer Form. The following details must be provided on this form:
- company name
- company number
- quantity and class(es) of shares being transferred
- name and address of the existing shareholder (transferor)
- name and address of the new shareholder (transferee)
- amount paid for the shares
- details of non-cash payments, if applicable
- signature of the transferor
- Stamp Duty liability, if applicable.
A copy of the stock transfer form must be delivered to HMRC if the sale value of the transfer exceeds £1,000. The transferee will be liable to pay Stamp Duty tax of 0.5% of the total sale value.
The transfer must then be approved by the board of directors either at a meeting or by way of a 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.
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When the transfer is complete, the director(s) must provide a copy of the stock transfer form to the transferor and transferee. The company should retain a copy with its statutory records, which must be stored at the registered office or SAIL address.
The new shareholder must be issued with share certificates as proof of ownership. The statutory register of members should be updated as soon as possible to reflect the share transfer and record details of the new and old shareholders. If necessary, the register of People with Significant Control (PSC register) will also need to be updated.
There is no need to immediately notify Companies House when a share transfer takes place. This information can be updated at any point before the next confirmation statement is due. Changes to shareholder information and share capital should be updated on the confirmation statement itself, but changes to PSC details must be reported separately, on the relevant Companies House PSC forms, before the confirmation statement is filed.
Issuing company shares after incorporation
Companies may be required to issue new shares for many reasons, such as:
- bringing in new business partners
- raising capital from outside investors to fund expansion or pay for a new project
- to pay business debts
- to introduce a bonus scheme for employees
- to gift shares to family members
The Companies Act 2006 imposes no legal restriction on the number of shares a private company can issue during or after incorporation. However, it is possible to include certain restrictions in the articles of association and shareholders’ agreement, if required. The most common restriction is an authorised capital, which is essentially a limit on the number of shares that can be issued.
To issue more company shares after incorporation, the prospective member(s) must make an application to the company. The existing members should waive their right to pre-emption by passing a Special Resolution (if applicable), and any other provisions described in the constitution should be complied with.
Finally, the allotment should be accepted by the company, which is usually carried out with a board resolution. Once the allotment has taken place, the directors must provide the following details on the Return of Allotment of Shares (Companies House form SH01):
- company name
- Company Registration Number
- date(s) of allotment(s)
- number, class (type), currency, and nominal value of each share
- amount paid or unpaid on shares
- details of non-cash payments, if applicable
- Statement of Capital
- prescribed particulars (rights) attached to shares
- director’s signature
Directors are legally responsible for filing Form SH01 at Companies House no later than 1 month after the allotment of company shares. They must also:
- provide a share certificate to each new shareholder
- retain copies of share certificates at the company’s registered office or SAIL address
- update the statutory register of members
- update the company’s PSC register (if applicable)
- tell Companies House about changes to PSC details using the relevant forms. This should be done before the next confirmation statement is filed
- notify Companies House of changes to shareholder details and shareholdings on the next confirmation statement
What is authorised share capital?
Authorised share capital is an optional provision that can be included in the articles of association. It limits the number and value of issued shares that a company may have at any given time.
Companies formed before 1st October 2009 under the Companies Act 1985 have this provision automatically included in their articles.
Companies incorporated under the Companies Act 2006 (i.e. those formed after 1st October 2009) are free to forgo this provision entirely; however, they can optionally include it in their articles, if they wish.
Why is authorised share capital no longer a legal requirement?
Authorised share capital became optional when Stamp Duty ceased to be payable on authorised capital. When companies were incorporated under the Companies Act 1985, they were required to pay Stamp Duty in relation to their authorised capital.
This was stated in the memorandum and articles of association as a sum of money divided into a number of shares of a fixed value. Companies were not required to issue all of their authorised shares, but they were not permitted to issue more than the maximum figure shown in the memorandum and articles.
Stamp Duty on shares is now only payable to HMRC when the sale value of a transfer exceeds £1,000.
What are pre-emption rights of existing shareholders?
Pre-emption rights are provisions that provide existing members with the first refusal of 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.
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Whilst there are no automatic statutory provisions for pre-emption rights on the transfer of shares, companies can choose to include such provisions in their articles.
This provision protects members against the unfair dilution of their shares because it enables them to maintain their existing proportion of ownership and control.
Example
- You own 25% of the company’s issued shares
- You must be given the option to purchase 25% of any company shares that become available
- If you decline to purchase the shares, they can then be offered to outside investors
Pre-emption rights can also prevent non-members from joining a company and potentially harming the status quo or mission of the business.
Directors’ power to transfer and allot company shares
The rights and powers of directors, including the power to transfer and allot shares, are outlined in the Companies Act 2006, the articles of association, and any service agreement between the company and the director. However, members have the power to alter these rights at any time by passing a resolution.
Directors’ power to transfer company shares
Share transfers can usually be authorised by directors. However, due to the impact that transfers can have on members’ beneficial rights and controlling interests, directors are sometimes prohibited from authorising transfers without the permission of existing members.
When a director has no power to authorise the transfer of company shares, the members must pass a resolution to either grant such authorisation to the director or permit the transfer on that occasion.
Directors’ power to issue company shares
The articles adopted by any private limited company formed after 1st October 2009 permit directors of companies with a single share class to authorise the allotment of ordinary shares without the approval of the existing members. This power, however, is still at the discretion of members because, under the articles, they have the right to restrict the directors’ powers.
If directors are not permitted to authorise an allotment, the shareholders must either pass a resolution to approve the allotment or amend the articles to grant such power to the directors.
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Comments (41)
A company incorporated on the 8th of November 2024 and the director decided to request a share transfer to happen from the 8th of November. Can a share transfer be backdated within 2 weeks of the incorporation?
Dear Berda,
Thank you for your comment.
The transfer is effective from when the documents were signed. If no documents were signed then the transfer has not happened. Please note, we would not draft backdated documents as a company. If we were provided with documents with that previous date, we could update Companies House.
Do let us know if you have any additional questions.
Kind regards,
The 1st Formations Team
A confirmation statement and change in PSC was filed 18 months ago, but a stock transfer form was never completed and therefore register of members was not updated. Does this invalidate the Confirmation Statement and therefore mean that the share transfer is invalid/non-binding?
Thank you for your kind enquiry.
A share transfer is only valid when the register of members has been updated. We are unclear from the scenario you describe whether a share transfer has taken place; however, the crucial thing to note is that regardless of what is registered on Companies House public register, and what share certificates exist, share ownership is only legally effective when it is entered into the register of members.
We trust this information is of use to you.
Kind regards,
The 1st Formations Team
Hi there
Do all share transfers need to be submitted at companies house or can the shareholding just be updated on the next Annual Return?
Kind regards
Thank you for your kind enquiry, Mary.
All share transfers need to be updated by the next confirmation statement (previously known as the annual return). It is best practice to file a confirmation statement as soon as possible after a share transfer, to update the public record. You may also need this to be filed quickly if a bank or creditor needs this to be visible on the public record.
We trust this information is of use to you.
Kind regards,
The 1st Formations Team
Hi,
Please can you tell me if there are any legal ramifications if shares that were allotted in April 2007 were not registered/reported to Companies House until April 2022? Are there any penalties, ie. fines or any other consequences to this having happened?
Many thanks
Thank you for your kind enquiry, Jenny.
The officers of a company have a duty to ensure that they file, among other things, information regarding the company’s share capital and shareholders. Failure to do so means that the company and its officers are in default and may be subject to a fine. If you find yourself in this situation, it is important to ensure that the public record is updated as soon as possible. You may need to submit second filings of previous confirmation statements and annual returns as part of this.
We trust this information is of use to you.
Kind regards,
The 1st Formations Team
Hello, my father owns a PCV company and he is currently the only director and share holder. The properties have mortgages on. He would like the company to eventually be signed over to me fully. Can he gift the shares to me or add me as a director without incurring costs when the properties have mortgages?
Thank you for the question!
From a company secretarial perspective, the transactions you have identified – the appointment of yourself as director and the transfer of shares to yourself – would not normally change simply or incur additional costs simply by virtue of there being properties in the company and those properties being mortgaged.
Having said that, there may well be tax implications or liabilities that have arisen as a result of the situation you have described. As we are not licensed to provide this advice, we would suggest you speak to an accountant. I am sorry we could not be of more assistance.
Best regards,
The 1st Formations Team
Hi,
For a private ltd company setup with a share capital of £100 (100 shares, 1 share = £1) what will be the sale value if I transfer 5 shares?
“A copy of the stock transfer form must be delivered to HMRC if the sale value of the transfer exceeds £1,000. The transferee will be liable to pay Stamp Duty tax of 0.5% of the total sale value.”
Is it £5 (based on face value) or will this be have to be based on valuation of the company as on the date of transfer?
Thanks for the question!
Generally speaking, the sale value (i.e. the amount of money or other consideration that the buyer is giving to the seller in exchange for the shares) is entirely up to what has been agreed by the buyer and seller. There is nothing in the Companies Act 2006 which dictates how much shares have to be sold for.
The amount the buyer and seller agree on will then help determine if stamp duty is payable, and if so how much.
We hope that helps.
Regards,
The 1st Formations Team
Hi, I hope I can make this understandable. 10 years ago me and several employees were told by our employer that they had to change the way we are paid or we could be made redundant. They gave us a share in the company and no longer paid us the same way . We now receive a basic salary plus share dividend . The salary changes all the time and does not meet minimum wage and the rest is share dividend. So one month I could receive a salary of (£300) , and receive a dividend payment of £1100, this is clearly stated on the pay slip, and the 2 figures are combined to give me a wage of £1400. My job hasn’t changed , I still work 40 hours per week. My concerns are , I think this is to avoid tax an Ni contributions by the employer. Will I be responsible for back payment of these if the company are found to be paying staff fraudulently.
We have never been given or offered advice on this share dividend , I have not received anything on paper or email with an explanation of how it works.
So after a long discussion with my partner I would like to go back to earning a normal wage without a dividend payment , also I have never agreed to be paid less than minimum wage as a basic salary. However once I inform my employer of my position, I expect things to become difficult.
Am I within my rights as an employee, will I be responsible for historical tax an Nic payments if I challenge them on this matter. I just want to be paid a wage and pay my contributions correctly .
I worked out on my basic salary for the last 5 years it is around £33,000 less than I would of received in minimum wage, the rest has been the so called dividend payment.
Any advice would be much appreciated.
Thank you for taking the time to write this Phil.
We’re very sorry but in a scenario as specific as this, and because it touches heavily on employment law, we are unable to advise you in this instance.
We wish you the best of luck in getting this issue sorted out.
Regards,
The 1st Formations Team
Dear first formations
I have a company, which only has one share, which I own.
I now want to raise money from investors. I plan to create 99 more shares, issue 15 of these to investors and issue the remaining 74 to myself.
The investors will be paying £1000 for each of their shares …. And I will be paying nothing for mine. This will enable me to raise £15,000 to finance growth in the company.
How does this work? How is it possible to issue 99 shares some of which (15) cost £1000 and others of which (74) cost nothing?
Andrew Campbell
Thanks for your kind enquiry, Andrew.
Based on what you have described, it appears you’ll be undertaking a standard issuance of shares, with the shares being issued to the investors being issued at a premium. A standard issuance of shares is carried out by the director(s) of the company. Dependent on the circumstances, you would often need the existing shareholder(s) to waive their right to pre-emption before the issuance to go ahead. Further, the director(s) themselves may require authorisation from the existing shareholder(s).
From a company secretarial perspective, issuing shares at different paid-up amounts to different parties is not uncommon. The applications for the shares and the director(s) approval for the varied amounts paid up would simply reflect the differences. A key point to raise in this circumstance relates to the 74 shares you are looking to issue to yourself, as you mentioned you would not pay anything for them. As a rule, no shares may be issued in a company at less than the nominal value (in other words, if a share has a nominal value of £1.00, it cannot be issued for less than this amount). In some cases, it may be possible to avoid immediate payment by agreeing with the company that you will pay up the shares if they are ever “called on.” However, you will need to check your company’s articles of association as to whether this is permitted.
We trust this information is of use to you.
Regards,
The 1st Formations Team
Hello,
I have a limited company and am the only director. I have one HMO and one rental property. I will however be buying two more HMO’s before the end of 2022. I wish to add my three sons names and addresses as directors so they can take equal shares after my death. Do I need a company like yourselves, my solicitor or accountant to do this. Would it be possible to name the house I want each son to have? Do I do this now, or wait until I purchase two more properties? Will they have problems acquiring a mortgage for a residential property if their names are added as directors. One son already has a residential house, one son has 4 HMO’s and is renting the property he lives in and the 3rd son recently got married and is yet to buy his own house. Finally, when I apply for a mortgage or a remortgage in the near future will the mortgage provider take into account salaries from all 4 of us or just myself, and if they take into account my sons salaries will this a problem when they decide to purchase a residential house? I own my residential outright. I am 69 years old and work part time. I am in receipt of a Government pension. Thank you. Rita
Thank you for your kind enquiry, Rita.
In general terms, mortgages for directors are often assumed to be easily obtained however, it can be a struggle because lenders tend to see self-employed borrowers as high risk. We would assume that it is fine to name the house/property that you wish for each of your children to have however this will need to be discussed with a solicitor for obtaining the relevant advice. Generally speaking, HMO mortgage rates tend to be higher than standard buy to let mortgage products. This is because the HMO mortgage marker is less competitive in terms of the number of lenders. Lender that are prepared to lend on an HMO will charge higher fees and rates for a mortgage. That being said, the income from an HMO should be more than enough to cover a mortgage, utility bills and maintenance. We would recommend speaking with property lawyers and mortgage specialists to seek further advice.
Regards,
The 1st Formations Team
Hi
I have limited company with two shares one of they want to leave and want to add new one what would be the procedure
Thank you for your kind comment, Nishanth.
I believe you are stating that there are two shareholders, one of which wants to no longer own their share, and the other other one wants to purchase the share no longer wanted by the first shareholder.
To execute this, the company can undertake a transfer of shares. This would require the existing shareholder to sign a stock transfer form and for the company to accept this.
If you would like us to undertake this transfer of shares for you, please purchase our Transfer of Shares service, which costs £49.99 plus VAT, and can be found here: https://www.1stformations.co.uk/transfer-of-shares/
Kind regards,
John Carpenter
Hello I have 5% shares in a ltd company. The company has been up,for sale for a long while now ,an offer has been made with two options ..sell the company buisness and building at a reduced fee agreed.sell all shares to a third party who has nothing to do with present company. Or sell the entire share capital of the company at an agreed sum .Can the share capital bee sold .there are7 share holders.
Hi Paul,
Thanks for getting in touch.
In most cases, the individual shareholders will have to agree to sell their shares, so they can be sold if each shareholder approves. The company directors should explain your options to you.
This is a complex situation – I don’t know the specifics of the sale and whether any shareholder agreement is in place, so you will have to consult a solicitor if there is any disagreement with regards the sale of the company and its issued share capital.
Best wishes,
Rachel
I purchased 5% shares in my employers business recently. As i am an additional rate tax payer (my wife does not work), i was considering transfering (gift) my 5% shares in to a New Co. (shareholders my wife and myself – 50% each), so that we may benefit from her lack of earnings.
I appreciate that there will be additional administration with creating and managing New Co, but it will help split the income arising from the 5% shares to maximise my wifes PA and basic rate band.
Do you forsee any problem with this?
Hi Stephen,
This could be an effective tax-saving strategy. Before taking any action, however, you must ensure that your employer allows shares to be transferred – there may be restrictions in place that prohibit the transfer of shares to non-employees.
Best wishes,
Rachel Craig
Can gifted Shares be taken back by the employer without telling the shareholder? Also can a director be removed without being told?
Hi Donna,
Regarding shares: it depends on the prescribed particulars of rights attached to the shares. A company can take back shares at its own discretion if this provision is clearly stated in the prescribed particulars.
Regarding the removal of a director – the termination of appointment must be legal and in line with the articles of association and the director’s contract. So, you can remove a director without their agreement, but you cannot simply remove them from the company without telling them.
I hope this helps.
Kind regards.
Hi , my mother owns a restaurant business for 2 years now .since she’s not healthy enough to run it solely , she had decided to transfer 49%of the shares to my husband whom has been helping to manage the business for 2 years now. She wants to give them as gift not far cash. How do i go about it ? Thanks for the help in advance .
Hi Rajini,
You can transfer shares as a gift but there are various ways to do this, and there will also be certain tax implications. I’m afraid you will have to consult an accountant for guidance – I would not recommend carrying out such a significant share transfer without doing so.
Best wishes.
Hi. I own my Limited Co outright and want to raise some equity finance. Is it just the Mems and Arts that l have to address to allow this or can l simply indicate on my web site that shares can be bought in my Company at £x per share?
I have always been under the impression that it is illegal to sell shares publicly and that you can only sell shares to an individual that you know…?
Any help appreciated
Hi Timothy,
If your company is private (as opposed to a PLC) you cannot sell shares on the open market. You can only sell them privately to other individuals.
You will have to speak to an accountant for professional advice before doing so because this is a big decision that requires careful planning and consideration.
Kind regards.
Many thanks for the article. It was very helpful. I have used your website for registering a company too which is very straight forward. I am a bit confused about the new shares certificate that you provided the link for in the article. On the header of the certificate it says Shareholder Name. Do I need to write the existing shareholder’s name in it or the new shareholders name? I understand that the new shareholders name goes where it says that “this is to certify that…” but what about the top of the certificate? Thanks
Hi David,
Yes, that’s right – you should put the new shareholder’s name in the header section and anywhere else where ‘shareholder name’ is requested. The certificate is for the benefit of the person who acquires the shares, so you would not issue a share certificate to the person selling them.
Best wishes.
I have an existing company currently with 1 share and I’m the only director and shareholder. I’m about to bring onboard 3 different shareholders all who want to invest on different terms. I agreed deals to sell shares to 2 investors at different prices and the other investor I agreed to give ‘free’ shares. Is it best to allocate more shares before I bring them onboard, then do share transfers for cash / knowledge? I’m puzzled on the best way to bring them onboard with having to pay in more capital myself.
Dear John
Thank you for your e-mail.
Having reviewed your question, we are not able to provide this type of advice to you and would advise that you seek the advice of a lawyer or accountant for your question.
Kind Regards
I was a Director of a Limited Company but the other two Directors decided to give rid of me without my knowledge or consent. I had 99 shares in the company, with 100 in total with the other two Directors. I was not able to reach an agreement to sell my shares back to the company due to some draconian terms they wished to impose. I have now discovered that my 99 shares seem to have been taken from me without my knowledge or consent and acquired by one of the Directors. What is my position and possible recourses?
Thank you
Hi Martin
Thank you for your message.
The points you have raised are for a solicitor rather than ourselves as we do not advise on legal matters.
Kind Regards
Is it possible to sell unpaid up shares?
Hypothetically, for a recently founded company with 3 existing shareholders and 1000 outstanding shares (400, 300, 300) would it be preferable to issue new shares or transfer existing share to take on a 4th shareholder with 20% equity stake?
Many thanks for your help.
Hello Ben
Thank you for your question.
There is no definitive answer as to what is best – it is the preference of the company. If you transfer existing shares, then you would reduce the amount of capital each holder would be liable to pay into the company; however’ if the new shareholder is paying more than £1,000 for the stock, they will have to pay Stamp Duty to HMRC. If you are issuing the new stock, then the Stamp Duty tax does not apply.
Kind regards
Can the authorised share capital of a company be increased by directors or existing sahreholders and can pre-emptive rights be cancelled by the existing directors or shareholders when issuing shares to a new investor which dilutes their investment? i.e. the existing shareholders are happy to dilute their share of the ownership in order to admit new partners. I am thinking of a situation where one man controls the existing business totally but wants to bring in a partner on a 50/50 basis.
Dear Barry
Thank you for your message.
The question regarding the increase of share capital is partly dependent upon when a company was formed as there is different legislation in the 2006 Companies Act rather as opposed to the 1985 Companies Act. If a company was formed pre the effective date of 1 October 2009, (when the relevant parts of the 2006 Companies Act) came in to place then you would have to be mindful of the limit of the Authorised Share Capital of the company and change appropriately if this provision requires before you can be confident of issuing new shares.
If the company was formed after that date then directors can be given the power by shareholder to issue new shares without any consultation with Companies House though any changes will require to be registered with them.
In terms of the pre-emptive rights, you would need to review the company Articles or any shareholders agreements for confirmation as to the position regarding the rights if new shares are to be issued or existing shares transferred.
I would suggest that given the options available to you it may be worthwhile to consult a solicitor or accountant before proceeding with any amendments to your current share capital.
Kind Regards