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BUSINESS TIPS

Can I issue more shares in my private company and if so how can I do it?

Provided that the directors have the authority to allot shares, as determined by the company’s Articles of Association, the Companies Act 2006 and any shareholder resolutions, a company can issue more shares. However, if the company is governed by Articles created under the Companies Act 1985, it may be that the Articles still contain an authorised share capital which acts as a cap on the number of shares that can be issued. If the company wants to issue more shares than the authorised limit, the authorised share capital must be removed by a resolution filed with the Registrar of Companies before the new shares can be issued. Company law regarding share issues largely looks at protecting the rights of existing shareholders, whose rights could be diluted due to the issue. Existing shareholders can be protected through the use of pre-emption rights.

If the directors are authorised to issue the shares, the allotment is first passed by a board resolution. The issue of shares is then effective and the shareholder obtains legal title to the shares when the name of the shareholder is added to the company’s register of members. This should be completed as soon as possible after the issue has been completed and in any case must not take more than two months after the allotment of shares has been completed. The company should also ensure that the share certificates for the issue are provided within two months in cases where this is not expressly overridden. It is also essential to ensure that a return of allotment and statement of capital is sent to the Registrar of Companies within one month of the allotment being made. This ensures that there is public disclosure of the increase in share capital.

It is important to complete any share issue correctly to ensure that the issue is valid and legally binding. If you require assistance regarding issuing shares in your company please contact us for more information.