{"id":5324,"date":"2017-04-24T12:17:00","date_gmt":"2017-04-24T11:17:00","guid":{"rendered":"https:\/\/www.qualityformations.co.uk\/blog\/?p=5324"},"modified":"2022-05-19T01:15:40","modified_gmt":"2022-05-19T00:15:40","slug":"how-to-add-limited-company-shareholders","status":"publish","type":"post","link":"https:\/\/www.qualitycompanyformations.co.uk\/blog\/how-to-add-limited-company-shareholders\/","title":{"rendered":"How to add company shareholders"},"content":{"rendered":"
The ownership of\u00a0limited companies can change at any time. It happens whenever new members (shareholders or guarantors) join a company or when existing members leave. Below, we explain how to add company shareholders after incorporation and how to record and report such changes.<\/p>\n Transfer of Shares Service<\/span><\/a>\n \n Whenever there is a change in ownership, the directors should ensure that the appropriate statutory registers are updated and that Companies House is informed of the change when the next confirmation statement is filed.<\/p>\n You can add new shareholders after company formation by issuing (allotting) more shares as well as by transferring existing ones. There are many reasons why a company may choose or need to do this, such as:<\/p>\n Existing company shares can be sold or gifted from current members to new shareholders at any time. To do so, you must complete a Stock Transfer Form for acceptance by the board. This is a relatively straightforward procedure in most cases.<\/p>\n How to transfer company shares<\/span><\/a>\n \n When the transfer is complete, the director should issue a share certificate to the new member and update the statutory register of members. You may also have to update the register of People with Significant Control<\/a> (PSC).<\/p>\n Companies House must then be notified about the change in share ownership and PSC information on the next confirmation statement<\/a>.<\/p>\n If you wish to sell or gift shares and you do not want to transfer any existing shares, the company will have to allot more shares. This will increase the total share capital of the company, but it will dilute the proportional value of the existing shares.<\/p>\n To issue new shares, an application should be made to the Company, the board must accept the allotment, and a Return of Allotment (Companies House form SH01<\/a>) should be completed with the following details:<\/p>\n Form SH01 must be sent to Companies House no later than one month after the allotment date. The director is then responsible for issuing a share certificate to the new member, updating the company\u2019s register or members and PSC register (if applicable), and notifying Companies House of the new shareholder (and PSC, if applicable) on the next Confirmation Statement.<\/p>\n The\u00a0articles of association<\/a> and shareholders\u2019 agreement often contain clauses that restrict the transfer or allotment of shares in certain circumstances. This is why it is important to refer to these documents before any transfer or allotment is authorised.<\/p>\n The most common restrictions include<\/p>\n Members have the right to include and amend any such restrictions at any time by passing a special resolution at a general meeting.<\/p>\n Many companies stipulate pre-emption rights on the transfer or allotment of shares, which means that any shares that become available must then be offered to existing members for first refusal. Shares can only be transferred to other people if members waive their pre-emption rights.<\/p>\n Pre-emption rights – the key to maintaining your shareholdings<\/span><\/a>\n \n The purpose of pre-emption rights is to ensure that shareholders are able to maintain their current percentage of ownership and control. These rights also help to prevent unsuitable persons acquiring a controlling interest in the business.<\/p>\n This is a clause that sets a limit to a company\u2019s total\u00a0share capital\u00a0by restricting the number and value of issued shares to a fixed sum.<\/p>\n Prior to the introduction of the Companies Act 2006, this restriction was compulsory, and new companies had to pay Stamp Duty in relation to their issued share capital. This is no longer the case, so very few companies choose to restrict their share capital now.<\/p>\n Members choose which powers to grant to directors. Sometimes this includes the power to authorise share transfers and allotments, especially when shareholders and directors are the same people. However, many shareholders prefer to retain this power because it directly impacts their level of control and profit entitlement.<\/p>\n What is a shareholders\u2019 agreement and why do I need one?<\/span><\/a>\n \n If a director does not have the power to authorise share transfers and allotments, existing members must approve the transfer or allotment themselves by passing a resolution at a general meeting or in writing.<\/p>\n Buy-back options are often included in the articles or shareholders\u2019 agreement allowing for the shares to be purchased (and cancelled) by the company.<\/p>\n This means that the company has the right to buy back shares when a director or employee leaves a company, thus ensuring that any beneficial ownership cannot be retained by someone who is no longer working for the business.<\/p>\n When a shareholder joins a company, it is very important to update the required statutory registers. These are usually kept at the registered office address.<\/p>\n The register of members must be updated to reflect, where applicable:<\/p>\nHow to add company shareholders after incorporation<\/h3>\n
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Transferring shares<\/h4>\n
Allotting new shares<\/h4>\n
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Restrictions on the transfer or allotment of shares<\/h3>\n
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Pre-emption rights<\/h4>\n
Authorised share capital<\/h4>\n
Director\u2019s power to authorise share transfers and allotments<\/h4>\n
Buy-back options of the company<\/h4>\n
Updating statutory company registers<\/h3>\n