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How to transfer shares and/or bring new investors into a company
It is important to distinguish between transferring shares and issuing shares.
A share that is already in issue (i.e owned by a shareholder) can be transferred.
The steps to change the ownership of a share are as follows:
- The Articles of Association should be checked to see if there are pre-emption rights on transfer. If there are, these rights should be waived by the existing shareholders or alternatively, the shares offered to them. Then the following steps can be completed.
- Person A completes a ‘Stock Transfer Form’ transferring [X] number of shares from them to Person B.
- Persons A & B submit the form to the company with the existing share certificate(s).
- The directors of the company approve the transfer, cancel the existing certificate(s) and issue a new certificate to Person B. If there are any shares remaining with Person A held on the cancelled share certificate(s) then a new certificate for the remainder is issued to Person A.
- The Register of Members is updated to reflect the new shareholdings.
- If the amount paid for the shares is more than or equal to £1,000 then stamp duty is due to HMRC at a rate of 0.5%
- No Companies House filing is necessary on transfer, but the change in ownership must be mentioned in the next CS01 (Annual Confirmation Statement).
Shares that are not already in issue (i.e they are not in existence yet and not owned by a shareholder) are required to be issued. This is the most common way of investors obtaining shares in a company.
The steps to issue shares are as follows:
- If the Company has more than one class of shares then the Articles of Association should be checked to make sure the directors have the authority to issue shares. If the company only has one class of shares then the directors already have authority to issue shares under the Companies Act 2006.
- The Articles of Association should also be checked to see if there are pre-emption rights on the issue of shares. If there are, these rights should be dis-applied by the existing shareholders or alternatively, the shares offered to them. Then the following steps can be completed.
- New investors apply for shares by lodging a share application letter with the company.
- The directors of the company approve the issue of shares and issue new certificates to the investors.
- Form SH01 is filed with Companies House together with, if applicable, a special resolution of the existing shareholders dis-applying pre-emption rights.
- The Register of Member is updated to reflect the new shareholdings.
- No stamp duty is payable on the issue of shares.
- The new shareholders must be mentioned in the next CS01 (Annual Confirmation Statement).
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