{"id":153341,"date":"2023-04-16T07:00:57","date_gmt":"2023-04-16T07:00:57","guid":{"rendered":"https:\/\/startups.co.uk\/?p=153341"},"modified":"2023-04-16T19:00:00","modified_gmt":"2023-04-16T19:00:00","slug":"issuing-shares-as-a-limited-company","status":"publish","type":"post","link":"https:\/\/startups.co.uk\/funding\/issuing-shares-as-a-limited-company\/","title":{"rendered":"Issuing shares as a limited company"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column][vc_column_text]<span style=\"font-weight: 400\"><strong>Issuing shares is one of the more interesting and prestigious parts of running a limited company.<\/strong> <\/span><\/p>\n<p><span style=\"font-weight: 400\">It is only an option with this particular business structure &ndash; things work differently for publicly listed companies. <\/span><\/p>\n<p><span style=\"font-weight: 400\">After you&rsquo;ve spent time building an incredible business with either rapid or steady growth, it&rsquo;s natural that you might want to bring people on board whose financial backing will be able to further support and bolster the business.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">This additional support should increase your feelings of responsibility and accountability to others, creating a bigger drive to make it a success, so that everyone who supported the business to that point is able to benefit. It&rsquo;s a little like handing out slices of cake at your birthday party &ndash; but with a lot fewer candles and a lot more regulations.<\/span><\/p>\n<p><span style=\"font-weight: 400\">In this guide, we&rsquo;ll explain all you need to know about issued shares for limited companies.<\/span>[\/vc_column_text]<\/p><div class=\"jumplinks-content\">\n <h3 class=\"jumplinks-content-title\">\n In this article, we will cover: <\/h3>\n <ul class=\"jumplinks-content-list\">\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-what-are-issued-shares\">What are issued shares?<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-why-companies-issue-shares\">Why companies issue shares<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-how-to-issue-shares-step-by-step\">How to Issue Shares: Step by Step<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-1-determine-the-type-of-shares-to-issue\">Step 1: Determine the type of shares to issue<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-2-set-the-number-of-shares-to-issue-and-their-par-value\">Step 2: Set the number of shares to issue and their par value<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-3-determine-the-method-of-issuing-shares\">Step 3: Determine the method of issuing shares<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-4-prepare-the-necessary-legal-documents\">Step 4: Prepare the necessary legal documents<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-5-determine-the-price-at-which-the-shares-will-be-sold\">Step 5: Determine the price at which the shares will be sold<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-6-file-and-or-update-the-necessary-paperwork-with-regulatory-bodies\">Step 6: File and\/or update the necessary paperwork with regulatory bodies<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-7-issue-evidence-of-ownership-to-new-shareholders\">Step 7: Issue evidence of ownership to new shareholders<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-8-consider-any-tax-implications-associated-with-the-issuance-of-shares\">Step 8: Consider any tax implications associated with the issuance of shares<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-step-9-comply-with-any-ongoing-reporting-and-disclosure-requirements-with-regulatory-bodies\">Step 9: Comply with any ongoing reporting and disclosure requirements with regulatory bodies<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-things-to-bear-in-mind-when-issuing-shares\">Things to bear in mind when issuing shares<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-conclusion\">Conclusion<\/a>\n <\/li>\n <li class=\"jumplinks-content-item\">\n <a class=\"jumplinks-content-link jumplink-anchor\" href=\"#link-faqs\">FAQs<\/a>\n <\/li>\n <\/ul>\n<\/div>\n[\/vc_column][\/vc_row][vc_row][vc_column]<div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-what-are-issued-shares\"><\/div>\n<\/div>\n[vc_column_text]\n<h2>What are issued shares?<\/h2>\n<p><b>Issued shares<\/b><span style=\"font-weight: 400\"> are the total amount of shares <\/span><b>available<\/b><span style=\"font-weight: 400\">, i.e. shares that are available to be sold and traded to potential investors, and any currently stored in a company&rsquo;s treasury.<\/span><\/p>\n<p><span style=\"font-weight: 400\">There are also <\/span><b>unissued<\/b> <b>shares<\/b><span style=\"font-weight: 400\">. These are not for sale and will likely never be circulated within the public market. These are usually irrelevant to investors, don&rsquo;t tend to affect the share capital, and are rarely ever used except in the case of extreme emergencies.<\/span>[\/vc_column_text]\n <\/p><div class=\"highlight-box\">\n <div class=\"highlight-box-decor\">\n <svg class=\"brush-stroke-svg brush-stroke-big\" preserveaspectratio=\"none\" viewbox=\"0 0 116 6\" version=\"1.1\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:xlink=\"http:\/\/www.w3.org\/1999\/xlink\">\n <g stroke=\"none\" stroke-width=\"1\" fill=\"#ea0037\">\n <path d=\"M94.0845406,5.55784045 C93.4629887,5.58758734 92.7723755,5.58758734 92.2198849,5.64708111 C92.0127009,5.66195455 91.7824965,5.67682799 91.5062512,5.66195455 C89.5955547,5.58758734 87.6618377,5.5727139 85.7511411,5.67682799 C85.5669776,5.69170144 85.2446914,5.67682799 84.9914666,5.67682799 C82.8275451,5.66195455 80.6866442,5.63220767 78.4997023,5.67682799 C76.0825561,5.72144832 73.5963485,5.64708111 71.271284,5.73632176 C69.3605874,5.81068898 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C86.1792662,4.06014784 86.2696559,4.04074932 86.2696559,4.0213508 Z\"><\/path>\n <\/g>\n <\/svg>\n <\/div>\n <div class=\"highlight-box-headline\">\n \n <span class=\"highlight-box-title\">\n Key terms to know <\/span>\n <\/div>\n \n <div class=\"highlight-box-content\">\n <p><b>Share capital (also known as &lsquo;statement of capital&rsquo;)<\/b><\/p>\n<p><span style=\"font-weight: 400\">This is the total value of shares, issued or non-issued. For example, if you decide to issue one hundred ordinary shares with a value of &pound;1 each, then the share capital would be &pound;100. You would likely want to price your shares relative to the current net worth of your business &ndash; factoring in your profits and growth rate with how much return your investors are likely to see (and by when).&nbsp;<\/span><\/p>\n<p><b>Share allotment<\/b><\/p>\n<p><span style=\"font-weight: 400\">This is the creation and issuing of new shares, by a company or its directors. You could think of it as an event where instead of a product, a company will announce and distribute a new amount of available shares for sale.<\/span><\/p>\n<p><b>Memorandum and articles of association <\/b><\/p>\n<p><span style=\"font-weight: 400\">According to Inform Direct, The memorandum of association is&nbsp;the document that sets up the company and the articles of association set out how the company is run, governed and owned. These documents are a crucial collection for any company, as they provide guidance on how the company should be run and how disputes should be resolved. They are often used in legal disputes or transactions, such as mergers or acquisitions, to determine the rights and obligations of the company and its stakeholders.<\/span><\/p>\n<p><b>Articles of incorporation<\/b><\/p>\n<p><span style=\"font-weight: 400\">This document provides a legal framework for its operation and governance. They are often used by investors, lenders, and other stakeholders to assess the business&rsquo;s structure and governance practices.<\/span><\/p>\n <\/div>\n <\/div>\n[\/vc_column][\/vc_row][vc_row][vc_column]<div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-why-companies-issue-shares\"><\/div>\n<\/div>\n[vc_column_text]\n<h2>Why companies issue shares<\/h2>\n<p><span style=\"font-weight: 400\">Companies issue shares (by selling them or giving them away) that represent an official &lsquo;percentage&rsquo; of the business. They can be issued to founders, staff, or to anyone interested in becoming a shareholder for the public record.<\/span><\/p>\n<p><span style=\"font-weight: 400\">While a company or company owner can create as many shares as they want, nothing is seen as valuable if it can be endlessly replicated and diluted. So, it is up to each company to decide where they draw the line, and what they consider reasonable, on their own terms.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">Companies and company owners will often limit shares to create a sense of exclusivity and retain the perception of a high value for each share.&nbsp;<\/span><\/p>\n<h3>Private limited company shares<\/h3>\n<p><span style=\"font-weight: 400\">A <\/span><b>private<\/b> <b>limited company<\/b><span style=\"font-weight: 400\"> (also known as a &lsquo;limited company&rsquo;, &lsquo;limited liability company&rsquo;, PLC, LLC, or &lsquo;company&rsquo;) is a type of business structure where the company has a legal identity of its own, separate from its owners.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">Within a limited company, you get to issue and sell shares (unlike sole traders, for example), and shareholders can help the business grow. They do not trade on public exchanges, however, as that would have to be done through an <strong><a href=\"https:\/\/startups.co.uk\/funding\/investors\/initial-public-offering\/\">Initial Public Offering (IPO)<\/a><\/strong> when the company reaches a specific amount of profit.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">For more information, <\/span><strong><a href=\"https:\/\/startups.co.uk\/setting-up\/setting-up-a-limited-company-information-needed\/\">here&rsquo;s how you set up a limited company<\/a><\/strong><span style=\"font-weight: 400\">.<\/span><\/p>\n<h3>Advantages and disadvantages of issuing shares<\/h3>\n<p><b>Advantages<\/b><b><\/b><\/p>\n<ul>\n<li><b>Investment without debt &ndash; <\/b><span style=\"font-weight: 400\">you are selling or giving away a percentage of your company. It may be a sale, or a benefit for staff, founders or investors. Issuing shares can be one way to gain capital for your company, particularly as part of <\/span><strong><a href=\"https:\/\/startups.co.uk\/funding\/investors\/series-funding\/\">series funding<\/a><\/strong><span style=\"font-weight: 400\"><span style=\"font-weight: 400\"> rounds.<\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li><strong>Diversification of ownership<\/strong> <span style=\"font-weight: 400\">&ndash; By issuing shares, a company can diversify its ownership base and spread the risk among a larger number of investors. This can help to reduce the risk of a single investor or group of investors gaining too much control over the company and potentially using that control to the disadvantage of other shareholders. Additionally, having a wider range of shareholders can provide the company with access to a broader pool of expertise and resources, which can be valuable for the company&rsquo;s growth and development.<\/span><\/li>\n<\/ul>\n<p><b>Disadvantages<\/b><b><\/b><\/p>\n<ul>\n<li><b>Dividends &ndash; <\/b><span style=\"font-weight: 400\">You have to distribute future profits to your shareholders on a periodic basis for as long as they hold the shares. This is not so much of a disadvantage if the business is going well, but can feel less palatable in harder times.<\/span><\/li>\n<\/ul>\n<ul>\n<li><b>Pressure \/ Accountability &ndash; <\/b><span style=\"font-weight: 400\">When you own the company alone, you don&rsquo;t have to answer to anyone or justify your actions, but when you have large shareholders, it is more than likely that you will have to at times.<\/span><\/li>\n<\/ul>\n<ul>\n<li><b>Ownership &ndash; <\/b><span style=\"font-weight: 400\">Issuing shares means you lose a percentage of ownership in your company, and this is always something that you have to watch out for. As you may have spotted, we&rsquo;ve covered this on both the advantages and disadvantages list. Whether you see this factor as a pro or a con all depends on what your company goals are, what your founding vision may have been, and how much ownership you intend to give away.<\/span><\/li>\n<\/ul>\n<h3>When might you have to issue shares?<\/h3>\n<p><span style=\"font-weight: 400\">Hopefully, issuing shares is something your business is <\/span><i><span style=\"font-weight: 400\">choosing<\/span><\/i><span style=\"font-weight: 400\"> to do, at a time of its preference. But, sometimes companies are compelled to issue shares as a last resort in the case of high debt, so they can recoup some capital gains and start over with a cleaner slate.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">In this case, issuing shares is a quick and efficient way to raise capital, particularly if there is a remaining level of interest or demand, despite your trickier circumstances.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">When the hard times pass, and if you as the founder would like to regain control and power over your company and your shares, there is always a possibility that you can make offers to your shareholders to potentially buy the shares back.<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-how-to-issue-shares-step-by-step\"><\/div>\n<\/div>\n[vc_column_text]\n<h2>How to Issue Shares: Step by Step<\/h2>\n<p><span style=\"font-weight: 400\">Here is our step-by-step guide to how you issue shares in your company:<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-1-determine-the-type-of-shares-to-issue\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 1: Determine the type of shares to issue<\/h3>\n<p>There are a couple of different types of shares that can be issued, including founder shares which are typically issued right at the beginning of a company&rsquo;s formation.<\/p>\n<h4>Founder shares<\/h4>\n<p><span style=\"font-weight: 400\">These are shares that are owned by the founders of a company. They are usually given at face value, and usually at large percentages. A founder can issue up to 100% of the shares for themselves, but this would of course defeat the purpose of using shares to generate more money for the company. In most cases, founder shares come with certain rights and privileges that are not available to other shareholders.&nbsp;<\/span><\/p>\n<h4>Ordinary shares<\/h4>\n<p><span style=\"font-weight: 400\">Most companies have just ordinary shares. They carry one vote per share, are entitled to participate equally in dividends and, if the company is wound up, share equally in the proceeds of the company&rsquo;s assets after all the debts have been paid.<\/span><\/p>\n<h4>Preference shares<\/h4>\n<p><span style=\"font-weight: 400\">This is a share type that ranks ahead of ordinary shares, typically with a higher claim to assets if the company were to be wound up, and a &lsquo;fixed&rsquo; share income that does not participate in the fluctuations of the company (which is therefore considered less risky overall).<\/span><\/p>\n<h4>Alphabet shares<\/h4>\n<p><span style=\"font-weight: 400\">Alphabet shares are a term that describes different classes of shares denoted by a letter. The classification determines a group of shares&rsquo; rights, which can be determined and personalised by the company according to their personal needs. This is usually done to make the shares more accessible for people in different tax brackets or who would like different benefits and features. For example, they could classify an &lsquo;A&rsquo; share as one that costs &pound;50,000 with a high dividend rate, and a &lsquo;B&rsquo; share at a lower upfront cost of &pound;10,000 but also a lower dividend rate.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-2-set-the-number-of-shares-to-issue-and-their-par-value\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 2: Set the number of shares to issue and their par value<\/h3>\n<p><span style=\"font-weight: 400\">Par value is the nominal or face value of a share in a company.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If you&rsquo;re issuing shares to investors, then the number of shares to issue should primarily be based on the company&rsquo;s capital needs. For example, if the company requires a significant amount of capital to fund its operations, it should be looking to issue a larger number of shares.<\/span><\/p>\n<p><span style=\"font-weight: 400\">If the company already has a strong financial position, it may be appropriate to set a higher par value for its shares. However, if the company is just starting out, or is in a weaker financial position, a lower par value may be more appropriate.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The number of shares issued should also be based on the demand from potential investors. If there is strong demand for the company&rsquo;s shares, the company may want to consider issuing a larger number of shares to take advantage of this demand.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-3-determine-the-method-of-issuing-shares\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 3: Determine the method of issuing shares<\/h3>\n<p><span style=\"font-weight: 400\">There are different methods of issuing shares that a UK company can use to raise capital, depending on their main objectives and goals. Here are some of the most common methods:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><b>Rights issue: <\/b><span style=\"font-weight: 400\">A rights issue is a way for a company to raise capital by offering existing shareholders and investors the right to buy new shares in proportion to their existing shareholding. This allows the company to raise capital without diluting the ownership of existing shareholders.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Initial public offering (IPO):<\/b><span style=\"font-weight: 400\"> An IPO is the process of issuing shares to the public for the first time. This allows the company to raise capital from a wide range of investors and can help to increase the visibility and profile of the company.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Private placement: <\/b><span style=\"font-weight: 400\">A private placement is a way for a company to issue shares to a specific group of investors, such as institutional investors or high net-worth individuals. This can be a more efficient way to raise capital than a public offering, as it can be completed more quickly and with fewer regulatory requirements.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Bonus issue: <\/b><span style=\"font-weight: 400\">A bonus issue means issuing additional shares to existing shareholders, free of charge. This can be a way to reward existing shareholders and increase the liquidity of the company&rsquo;s shares.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Convertible bonds:<\/b><span style=\"font-weight: 400\"> Convertible bonds are debt securities that can be converted into shares at a later date. This can be a way for a company to raise capital without immediately diluting the ownership of existing shareholders.<\/span><\/li>\n<\/ul>\n<p>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-4-prepare-the-necessary-legal-documents\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 4: Prepare the necessary legal documents<\/h3>\n<p><span style=\"font-weight: 400\">In the event that new shareholders are to be included in your company, and new shares are to be issued, you will have to update a document called <\/span><b>The Resolution To Issue Shares<\/b><span style=\"font-weight: 400\">.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">This is passed by the founder, <strong><a href=\"https:\/\/startups.co.uk\/setting-up\/company-director-responsibilitie\">board of directors<\/a><\/strong>, or shareholders, to authorise the issuance of shares. It&rsquo;s also important to bear in mind that when issuing new shares, existing shareholders must give consent.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-5-determine-the-price-at-which-the-shares-will-be-sold\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 5: Determine the price at which the shares will be sold<\/h3>\n<p><span style=\"font-weight: 400\">At this point, you determine the price at which the shares will be sold, offer the shares to potential investors or shareholders at that price point, receive payment for the shares (unless you are gifting them to staff or founders), and then issue share certificates or electronic records to the new shareholders.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-6-file-and-or-update-the-necessary-paperwork-with-regulatory-bodies\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 6: File and\/or update the necessary paperwork with regulatory bodies<\/h3>\n<p>[\/vc_column_text][vc_column_text]<span style=\"font-weight: 400\">It is important that you fulfil all the other necessary legal paperwork, including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><b>The Shareholder Register<\/b><span style=\"font-weight: 400\"> &ndash; a list of active owners of a company&rsquo;s shares, updated continuously.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Form SH01<\/b><span style=\"font-weight: 400\"> &ndash; This form is used to notify Companies House of the allotment of new shares, including the number of shares issued and the names and addresses of the new shareholders.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>The Register of Allotments<\/b><span style=\"font-weight: 400\"> (aka &lsquo;Statement of Allotments&rsquo;) &ndash; where the number of shareholders and their shares must also be stated, and stay updated with Companies House. This register\/statement must include details of the new shares issued, such as the number, type, and price of the shares.<\/span><\/li>\n<li style=\"font-weight: 400\"><b>Statement of Capital <\/b><span style=\"font-weight: 400\">&ndash; this is a document that summarises the company&rsquo;s share capital, including the number of shares in issue, their par value, and any changes to the share capital.&nbsp;<\/span><\/li>\n<\/ul>\n<p>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-7-issue-evidence-of-ownership-to-new-shareholders\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 7: Issue evidence of ownership to new shareholders<\/h3>\n<p><b>Share Certificates <\/b><span style=\"font-weight: 400\">are physical certificates that may be issued to shareholders as evidence of their ownership of shares in the company.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-8-consider-any-tax-implications-associated-with-the-issuance-of-shares\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 8: Consider any tax implications associated with the issuance of shares<\/h3>\n<p><span style=\"font-weight: 400\">If a company issues shares and pays dividends to shareholders, the dividends are generally subject to income tax. The company may also have to withhold income tax on the dividends before paying them to the shareholders.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Capital gains tax can also be a factor if the company issues shares and subsequently sells some of its own shares for a profit, as it may be liable to pay capital gains tax on the gain.<\/span><\/p>\n<p><span style=\"font-weight: 400\">However, not all tax implications are negative ones. The company may be able to claim corporation tax relief on the costs associated with issuing shares, such as legal fees or underwriting fees.<\/span><\/p>\n<p><span style=\"font-weight: 400\">In some cases, the company may issue shares that qualify for tax incentives for investors, such as the <\/span><strong><a href=\"https:\/\/startups.co.uk\/funding\/investors\/enterprise-investment-scheme\/\">Enterprise Investment Scheme (EIS)<\/a><\/strong><span style=\"font-weight: 400\"> or the <\/span><strong><a href=\"https:\/\/startups.co.uk\/funding\/investors\/seis-investment-scheme\/\">Seed Enterprise Investment Scheme (SEIS)<\/a><\/strong><span style=\"font-weight: 400\">. These schemes provide tax relief for investors who buy shares in eligible companies.<\/span>[\/vc_column_text]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-step-9-comply-with-any-ongoing-reporting-and-disclosure-requirements-with-regulatory-bodies\"><\/div>\n<\/div>\n[vc_column_text]\n<h3>Step 9: Comply with any ongoing reporting and disclosure requirements with regulatory bodies<\/h3>\n<p><span style=\"font-weight: 400\">It&rsquo;s a good rule of thumb for most business activities in general that you want to keep all the main governmental and regulatory bodies notified of any changes in your company structure as soon as possible.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">For most of the things mentioned within this process of issuing shares, these changes should all be filed within <\/span><b>14 days<\/b><span style=\"font-weight: 400\">.<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-things-to-bear-in-mind-when-issuing-shares\"><\/div>\n<\/div>\n[vc_column_text]\n<h2>Things to bear in mind when issuing shares<\/h2>\n<p><span style=\"font-weight: 400\">When issuing shares, there are several important things to bear in mind. Here are some key considerations:<\/span><\/p>\n<h3>Dilution of voting power and\/or profits<\/h3>\n<p><span style=\"font-weight: 400\">It&rsquo;s important to note that shareholders who hold your typical ordinary shares will also have a percentage of the company&rsquo;s voting rights.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">This is very important when considering how much percentage to give a shareholder because it gives them significant influence in the company. You&rsquo;re unlikely to want any one individual investor to have more shares than you as a company founder, because, in a worst-case scenario, it would mean that a shareholder could potentially use their majority to vote you out of the company.<\/span><\/p>\n<p><span style=\"font-weight: 400\">In order to prevent unfairness or dilution, the most common way to issue more shares whenever a new shareholder purchases shares is to use percentages.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">As an example, no matter how many new shares there are in total, the people who purchased 40% will always have 40%, by virtue of they, too, receiving more shares. This could help to avoid disputes and disagreements in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Issuing shares can dilute the value of existing shares and reduce the proportion of profits each shareholder is entitled to in some cases. This can affect the company&rsquo;s taxable profits and may result in a lower corporation tax liability.<\/span><\/p>\n<h3>Stamp duty<\/h3>\n<p><span style=\"font-weight: 400\">If the shares were paid for, or partly paid for, by transferring assets to the company (i.e: they are paid for other than in cash), you will also need to consider if any stamp duty may be payable on the transfer of the assets.<\/span><\/p>\n<h3>Costs of issuing shares<\/h3>\n<p><span style=\"font-weight: 400\">Issuing shares can involve significant legal and administrative costs, particularly as you&rsquo;ll want to avoid human errors when filing all the necessary documents. Companies should carefully consider the costs and benefits of issuing new shares.<\/span><\/p>\n<h3>Rules & Regulations for Issuing Shares<\/h3>\n<p><span style=\"font-weight: 400\">In the UK, the process of issuing shares involves complying with the Companies Act 2006. In short, this sets out the legal framework for the formation, governance, and operation of companies in the UK. That includes the requirements for <\/span><strong><a href=\"https:\/\/startups.co.uk\/setting-up\/how-to-register-a-company-name\/\">company registration<\/a><\/strong><span style=\"font-weight: 400\">, the duties of directors and company officers, and rules for shareholder meetings and decision-making.&nbsp;<\/span>[\/vc_column_text][vc_column_text]<strong>Read more<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/startups.co.uk\/strategy\/wills-business-owners\/\" target=\"_blank\" rel=\"noopener\">Wills for business owners: passing it on<\/a><\/li>\n<\/ul>\n<p>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-conclusion\"><\/div>\n<\/div>\n[vc_column_text]\n<h2>Conclusion<\/h2>\n<p><span style=\"font-weight: 400\">Issuing shares can be a useful tool for companies to raise capital, or an appealing way of rewarding staff and founders with a stake in the company&rsquo;s success. While there are some key considerations you will have to make sure to get right, ultimately we believe learning how to issue shares is an important step for any limited company on its growth journey.<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column]<\/p><div class=\"jumplink-anchor-section\">\n <div class=\"jumplink-anchor-pointer\" id=\"link-faqs\"><\/div>\n<\/div>\n<div class=\"faq\">\n <span class=\"faq-title\">\n Frequently Asked Questions <\/span>\n <ul class=\"faq-list\">\n <li class=\"faq-item\">\n\n <span class=\"faq-question\">\n How long does it take to issue shares? <\/span>\n\n <div class=\"faq-answer\">\n With a small number of shareholders and no regulatory issues, a share issue can be completed often in a matter of days or weeks. However, more complex issues may take several months or longer. <\/div>\n<\/li>\n\n\n<li class=\"faq-item\">\n\n <span class=\"faq-question\">\n Can I issue different classes of shares? <\/span>\n\n <div class=\"faq-answer\">\n Yes, companies in the UK can issue different classes of shares, which are typically referred to as ``share classes.`` <\/div>\n<\/li>\n\n\n<li class=\"faq-item\">\n\n <span class=\"faq-question\">\n Can shareholders transfer their issued shares? <\/span>\n\n <div class=\"faq-answer\">\n A shareholder can transfer their issued shares to another party, subject to any restrictions that may be outlined in the company's articles of association or other governing documents. <\/div>\n<\/li>\n\n\n<li class=\"faq-item\">\n\n <span class=\"faq-question\">\n How are the proceeds from issuing shares used? <\/span>\n\n <div class=\"faq-answer\">\n The proceeds from issuing shares can be used by a company in a variety of ways, depending on its specific needs and goals. <\/div>\n<\/li>\n\n\n <\/ul>\n <script type=\"application\/ld+json\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@type\":\"FAQPage\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"How long does it take to issue shares?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"With a small number of shareholders and no regulatory issues, a share issue can be completed often in a matter of days or weeks. However, more complex issues may take several months or longer.\"}},{\"@type\":\"Question\",\"name\":\"Can I issue different classes of shares?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes, companies in the UK can issue different classes of shares, which are typically referred to as ``share classes.``\"}},{\"@type\":\"Question\",\"name\":\"Can shareholders transfer their issued shares?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"A shareholder can transfer their issued shares to another party, subject to any restrictions that may be outlined in the company's articles of association or other governing documents.\"}},{\"@type\":\"Question\",\"name\":\"How are the proceeds from issuing shares used?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"The proceeds from issuing shares can be used by a company in a variety of ways, depending on its specific needs and goals.\"}}]}<\/script><\/div>\n[\/vc_column][\/vc_row]\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_column_text]Issuing shares is one of the more interesting and prestigious parts of running a limited company. It is only an option with this particular business structure &ndash; things work differently for publicly listed companies. After you&rsquo;ve spent time building an incredible business with either rapid or steady growth, it&rsquo;s natural that you might want to [&hellip;]<\/p>\n","protected":false},"author":91509,"featured_media":153342,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3051,2993,4350],"tags":[4369],"acf":[],"yoast_head":"\n<title>Issuing Shares as a Limited Company | Startups.co.uk<\/title>\n<meta name=\"description\" content=\"If the time&#039;s come to issue shares in your business, here\u2019s how to do it right and maximise benefits for shareholders and your company.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/startups.co.uk\/funding\/issuing-shares-as-a-limited-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" 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