Issuing New Shares in a UK Limited Company: The Founder's No-Nonsense Guide

Every year, thousands of UK founders hit the same wall: an investor says yes, the term sheet is agreed, the money is ready to move — and then somebody asks, "So how do we actually issue the shares?" What follows is usually a panicked WhatsApp to the company's accountant, a Google search that throws up twenty conflicting answers, and a creeping realisation that nobody involved has done this before.

The mechanics of issuing new shares in a UK limited company are not complicated, but they are unforgiving. Get the paperwork wrong and you can invalidate an entire funding round. Miss a Companies House filing and the share allotment may not be legally recognised. Price the shares carelessly and HMRC will come knocking with a tax bill your new shareholders were not expecting. The stakes are higher than most founders realise — and the process is more straightforward than most founders fear.

This guide walks you through every step, from checking your articles to filing the return of allotment, so the next time someone asks "how do we issue shares?" you have a clear, confident answer.

Why companies issue new shares

Before diving into the how, it helps to understand the why. UK limited companies issue new shares for a handful of reasons, and each one comes with its own considerations:

• Raising investment. The most common reason. An angel investor, a venture fund, or a group of friends-and-family backers put money into the company in exchange for newly created shares. This is an allotment — the company creates shares that did not previously exist and issues them to the investor.
• Bringing in a co-founder or key hire. Equity is often the currency that early-stage companies use to attract talent they cannot yet afford to pay at market rate. Issuing shares (or granting options that convert into shares later) is how that equity gets created.
• Restructuring ownership. Sometimes the existing shareholders want to rebalance who owns what — perhaps after a partner exits, or to reflect a change in how much each founder is contributing to the business.
• Converting debt. Convertible loan notes and advance subscription agreements (ASAs) eventually convert into shares. When that trigger fires, the company needs to allot and issue the shares the note or ASA promises.

Regardless of the reason, the legal process is broadly the same. And every step matters.

Step 1: Check your articles of association

Your articles of association are the rulebook for your company. Before you issue a single share, you need to check two things:

1. Do the directors have authority to allot shares? Under Section 550 of the Companies Act 2006, directors of a company with only one class of shares have automatic authority to allot more shares of that class — unless the articles restrict it. If your company has multiple share classes (ordinary and preference, for example), you need a specific authority under Section 551, which is usually granted by an ordinary resolution of the shareholders.
2. Are there pre-emption rights? Section 561 of the Companies Act gives existing shareholders the right to be offered new shares before they are offered to anyone else, in proportion to their existing holdings. This protects shareholders from dilution. You can disapply pre-emption rights by special resolution (75% majority), or your articles may already exclude them — the Model Articles for private companies limited by shares do not disapply them by default, so check carefully.

If your company was incorporated with the standard Model Articles and has a single class of ordinary shares, you are in the simpler camp. But if a previous solicitor drafted bespoke articles — especially if you have already raised a round — there may be additional restrictions, consent requirements, or drag-along/tag-along provisions buried in the detail. Read the articles before you do anything else.

Step 2: Decide the share price and class

Every share must have a nominal value (also called par value). This is the minimum legal price of the share — most UK startups set it at £0.01 or £1 at incorporation. You cannot issue shares for less than their nominal value, but you can (and almost always do) issue them for more.

The difference between the nominal value and the actual price paid is called the share premium. If your company's shares have a nominal value of £0.01 and an investor pays £10 per share, £0.01 goes to share capital and £9.99 goes to the share premium account. This is not just an accounting detail — HMRC pays close attention to share pricing, and getting it wrong can have real tax consequences.

Two tax traps founders fall into:

• Issuing shares to employees or co-founders at below market value. If HMRC decides the shares were worth more than the recipient paid, the difference is taxed as employment income — potentially at 45%. This is why EMI option schemes exist: they let you grant equity at an HMRC-agreed valuation and defer the tax hit to the point of sale.
• Inconsistent pricing across rounds. If you issue shares to an angel at £1 each on Monday and to a co-founder at £0.01 each on Tuesday, HMRC will want to know why the co-founder got a 99% discount. Have a clear, defensible rationale for every share price.

Step 3: Pass the right resolutions

Shares are allotted by the board of directors, not by the shareholders — provided the directors have the authority described in Step 1. You will need:

1. A board resolution to allot. This is a directors' resolution (usually a written resolution signed by all directors, or a resolution passed at a board meeting) that approves the allotment of a specific number of shares, at a specific price, to specific people. It should reference the directors' authority under Section 550 or 551.
2. A shareholders' resolution to disapply pre-emption rights (if needed). This is a special resolution requiring 75% of votes. If your existing shareholders are all participating in the round pro-rata, you may not need this. If outside investors are coming in, you almost certainly do.
3. A shareholders' resolution to authorise allotment under Section 551 (if the company has multiple share classes or the articles restrict the directors' authority). This is an ordinary resolution — simple majority.

For most early-stage companies with a handful of founder-shareholders, these resolutions can be passed as written resolutions — no physical meeting required. The resolution is circulated, each eligible member signs or indicates agreement, and it takes effect once the required majority has agreed.

Step 4: Issue the share certificates

Under the Companies Act 2006, a company must issue share certificates to new shareholders within two months of allotment. In practice, you should do it immediately — investors want proof of ownership, and it avoids the paperwork piling up.

Each certificate must state:

• The company name and registration number
• The shareholder's name
• The number and class of shares held
• The nominal value of those shares
• The amount paid up on each share (usually the full nominal value plus any premium)
• A unique certificate number

The certificate should be signed by a director (or the company secretary, if you have one) and carry the company seal if the articles require it. Most modern articles do not require a seal, but some investors — particularly institutional ones — may expect it.

Step 5: Update the statutory registers

Every UK limited company is required to maintain internal statutory registers, and a share allotment triggers updates to several of them:

• Register of members. Add the new shareholders (or update existing entries if current shareholders are buying more). Record the number of shares held, the date of allotment, and the amount paid.
• Register of allotments. Record the allotment itself — the date, the number and class of shares, the names of allottees, and the amount paid or due.
• PSC register. If any new shareholder holds 25% or more of the shares (or voting rights), they become a Person with Significant Control. You must update your PSC register and notify Companies House within 14 days. Since November 2025, PSCs must also complete identity verification with Companies House — a requirement introduced under the Economic Crime and Corporate Transparency Act.

These registers are legal documents. If they are incomplete or inaccurate, every director of the company commits a criminal offence — albeit one that is rarely prosecuted in practice. The more practical risk is that messy registers create chaos during due diligence when you try to raise your next round or sell the business.

Step 6: File the return of allotment (SH01)

This is the step that makes it official. Within one month of allotting shares, you must file a return of allotment (form SH01) with Companies House. This tells the public register that new shares have been created and who holds them.

The SH01 requires:

• The date of allotment
• The number and nominal value of shares allotted
• The class of shares (e.g. Ordinary)
• The amount paid and unpaid on each share
• The share premium, if any
• Details of any non-cash consideration (if shares were issued in exchange for assets rather than money)

Filing late is a criminal offence — again, rarely prosecuted for small delays, but it leaves a visible gap on your Companies House record. Investors and acquirers doing due diligence will notice. And under the Companies Act, late filing can result in a fine for every officer of the company.

The SH01 can be filed online through Companies House, or through Filing HQ — where we prepare it for you, check it against your existing share structure, and file it the same day.

Step 7: Update your next confirmation statement

Your annual confirmation statement must reflect the new share capital and any changes to the register of members. If you have allotted shares between confirmation statements, the next CS01 will need to include the updated statement of capital and the details of all shareholders as at the confirmation date. This is not an additional filing — it is part of the normal annual cycle — but you need to make sure the numbers line up.

Common pitfalls that cost founders money and time

We see the same mistakes every month at Filing HQ. Here are the ones that hurt the most:

1. Forgetting pre-emption rights. If you allot shares to a new investor without first offering them to existing shareholders (or disapplying their pre-emption rights), the allotment is voidable. An unhappy existing shareholder can challenge the entire round.
2. Not filing the SH01 within one month. The clock starts from the date of allotment, not the date the money lands. If you allot shares on 1 March, the SH01 is due by 1 April — regardless of when the investor actually transfers funds.
3. Issuing shares below nominal value. This is flat-out illegal under the Companies Act. If your shares have a nominal value of £1, you cannot issue them for £0.50. The subscriber must pay at least the nominal value. If you need a lower price, you first need to reduce the nominal value — which is a separate legal process entirely.
4. Neglecting the share premium account. The premium is not free money to spend. It sits in a restricted reserve and can only be used for specific purposes (like issuing bonus shares or writing off preliminary expenses). Founders who treat it as working capital create accounting problems that surface at the worst possible time.
5. Losing track of the cap table. After two or three rounds of investment, share splits, and option grants, many founders genuinely do not know who owns what percentage of their company. This is the single biggest cause of deal delays in Series A due diligence.

The identity verification angle

Since November 2025, new directors and PSCs must verify their identity with Companies House — either through GOV.UK One Login or via an Authorised Corporate Service Provider (ACSP). If your share issue creates a new PSC (anyone holding 25% or more of shares or voting rights), that person needs to complete identity verification before you can file certain changes.

This is a relatively new requirement under the Economic Crime and Corporate Transparency Act, and it catches a lot of founders off guard. Filing HQ is a registered ACSP — we can verify your new shareholders' identities and file everything in one go, so the process does not stall waiting for someone to figure out GOV.UK One Login.

How Filing HQ makes share issues painless

Issuing shares should not require a law degree or a three-week back-and-forth with Companies House. Here is what happens when you use Filing HQ's share issue service:

1. Tell us the details. How many shares, what class, what price, and who is receiving them. We will check your existing share structure and articles to flag any issues before we start.
2. We prepare everything. Board resolution, shareholder resolutions (if needed), share certificates, statutory register updates, and the SH01 — all drafted and ready for your review.
3. You approve, we file. Once you sign off, we file the SH01 with Companies House the same day. Your public record is updated, your registers are clean, and your cap table is current.

No chasing, no guesswork, no midnight Googling. Just shares issued properly, with a paper trail that will survive any due diligence process.