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 administratively straightforward — but the legal and tax implications are unforgiving. Get the paperwork wrong and you can invalidate an entire funding round. Miss a Companies House filing and the share allotment sits in limbo on the public register. Price the shares carelessly and HMRC will come knocking with a tax bill your new shareholders were not expecting. The process has more moving parts than most founders realise — and more consequences for getting them wrong.

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.

Issuing shares vs. transferring shares — get this right first

Before anything else, make sure you actually need to issue shares. There are two fundamentally different ways shares end up in someone's hands, and confusing them is one of the most common early mistakes:

• Issuing shares (allotment) — the company creates brand-new shares that did not previously exist and allots them to a subscriber. The total share capital of the company goes up. This is what happens during investment rounds, when bringing in co-founders with equity, or when converting loan notes into shares. It is governed by specific sections of the Companies Act 2006, requires board (and sometimes shareholder) approval, and must be reported to Companies House via form SH01.
• Transferring shares — an existing shareholder sells or gifts their shares to someone else. The total share capital stays the same; only the ownership changes. This uses a stock transfer form (typically J30), may trigger stamp duty, and is reported through the next confirmation statement — not an SH01. If this is what you need, our share transfer guide and service covers the process.

If the total number of shares in the company should increase, you need an allotment. If existing shares are just changing hands, you need a transfer. Getting this wrong means filing the wrong forms, creating phantom shares, or accidentally diluting existing shareholders.

The two-step process every founder should understand

Issuing shares is not a single event — it is a two-step process, and understanding the distinction saves a lot of confusion:

1. The internal legal process. This is where the shares are actually created. It includes checking your articles, securing the right approvals (board and/or shareholder resolutions), allotting the shares, updating your statutory registers, and issuing share certificates. Once these steps are complete, the shares legally exist and the new shareholders are members of the company.
2. The external filing with Companies House. This is where you report what you have already done. You file form SH01 (the return of allotment) to update the public register with the new share capital and shareholder information.

Here is the critical point that catches people out: filing the SH01 does not create the shares. The shares are created when the board passes the resolution to allot and the allotment is entered in your internal registers. The SH01 is a notification — it tells Companies House and the public what has already happened. But filing it is a legal obligation, and the deadline is strict: within one month of the date of allotment.

Why companies issue new shares

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. Note that this may involve a combination of issuing new shares and transferring existing ones.
• 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. Here is the step-by-step.

Step 1: Check your articles and confirm authority to allot

Your articles of association are the rulebook for your company, and they are the first thing you must check before issuing a single share. The two critical questions:

Do the directors have authority to allot shares?

Under the Companies Act 2006, directors cannot simply create new shares whenever they like. They need authority, and it comes from one of two sources:

• Section 550 — automatic authority for single-class companies. If your company has only one class of shares (e.g. ordinary shares), the directors have automatic authority to allot more shares of that same class — unless the articles specifically restrict or remove it. The standard Model Articles do not restrict this, so most single-class companies are covered.
• Section 551 — authority by shareholder resolution. If your company has multiple share classes (ordinary and preference, for example), or if your articles restrict the Section 550 authority, you need the shareholders to grant the directors explicit authority to allot. This is done by ordinary resolution (simple majority) and typically specifies the maximum number of shares the directors can allot and a time limit (usually five years).

Allotting shares without proper authority is a serious matter — the allotment itself remains valid, but every officer who knowingly authorised or permitted it commits a criminal offence under the Companies Act. Do not skip this check.

Are there pre-emption rights?

Section 561 of the Companies Act gives existing shareholders a statutory right of first refusal. Before you offer new shares to an outsider, you must first offer them to your existing shareholders, in proportion to their current holdings. This protects shareholders from having their ownership diluted without their consent.

Pre-emption rights can be disapplied in three ways:

• Special resolution — the shareholders vote (75% majority required) to disapply pre-emption rights for a specific allotment or generally for a set period.
• Articles of association — private companies can exclude pre-emption rights entirely in their articles. The default Model Articles do not disapply them, so unless yours were specifically amended, they apply.
• All shareholders participate pro-rata — if every existing shareholder is taking up their proportional entitlement in the new round, pre-emption rights are satisfied by definition.

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. If you have a shareholders' agreement, check that too. 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 matters because the share premium is a restricted reserve — it cannot be treated as distributable profit or used as working capital. It sits on the balance sheet and can only be used for specific purposes under the Companies Act (such as issuing bonus shares or writing off preliminary expenses).

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 can be 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. Depending on your situation, you will need some or all of the following:

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 a 75% majority. 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.

Keep the signed resolutions safe. They form part of your company's statutory records and will be scrutinised during any future due diligence.

Step 4: Allot the shares and update your statutory registers

Once the resolutions are passed, the shares are formally allotted. This is the moment they legally come into existence. The date of the board resolution (or the date specified in it) becomes the date of allotment — and the clock starts ticking on your filing deadlines.

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 allotted, the names of allottees, and the amount paid or due on each share.
• PSC register. If any new shareholder holds more than 25% 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 officer of the company commits a criminal offence under the Companies Act. 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 5: Issue share certificates

Under the Companies Act 2006, a company must issue share certificates to new shareholders within two months of allotment. This is not optional — it is a legal requirement, and failure to comply is an offence by every officer of the company in default. In practice, you should do it promptly — 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 6: File the return of allotment (SH01)

This is the external filing step. Within one month of the date of allotment, you must file a return of allotment (form SH01) with Companies House. Remember: the SH01 does not create the shares — it reports the allotment that has already taken place. But it is a legal obligation, and the deadline is strict.

The SH01 includes a statement of capital, which is a snapshot of the company's entire share structure after the allotment. This must show:

• Total number of shares in the company (across all classes)
• Aggregate nominal value of those shares (e.g. 10,000 shares at £0.01 = £100 total nominal value)
• For each class of shares: the prescribed particulars (rights attached), the number of shares, and the aggregate nominal value
• Amount paid up and amount unpaid on each share — if shares are fully paid (as they usually are in early-stage companies), the paid-up amount equals the nominal value plus any premium, and the unpaid amount is nil
• Share premium, if any
• Details of any non-cash consideration (if shares were issued in exchange for assets, services, or intellectual property rather than money)

The statement of capital must be accurate. It becomes part of the public record and must reconcile with your internal registers, your confirmation statements, and your accounts. Errors here surface at the worst possible time — usually during investment due diligence or a company sale.

Filing late is a criminal offence under Section 557 of the Companies Act. While small delays are rarely prosecuted, late filing leaves a visible gap on your Companies House record that investors and acquirers will notice. And 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.

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 (CS01) 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 match what you reported in the SH01. Discrepancies between the SH01, your registers, and the confirmation statement are a red flag during due diligence and can delay funding rounds.

Tax implications you cannot afford to ignore

Share issuance sits at the intersection of company law and tax law. While the legal process of allotting shares is the same regardless of the commercial context, the tax consequences vary significantly depending on who is receiving the shares and what they are paying for them. The main areas to be aware of:

• Income tax on shares issued below market value. If shares are issued to an employee, director, or connected person at less than their market value, HMRC may treat the discount as employment income — taxable at up to 45%, plus National Insurance. This is why many companies use EMI option schemes, which allow equity to be granted at an HMRC-agreed valuation with much more favourable tax treatment.
• Capital gains tax (CGT). While issuing new shares does not typically trigger CGT (the shares are being created, not sold), any future sale or disposal of those shares will be subject to CGT. Current rates for shares are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Business Asset Disposal Relief may reduce this to 10% on the first £1 million of qualifying gains, but the conditions are strict.
• Stamp duty. Stamp duty does not apply to the issuance of new shares (it applies to transfers of existing shares where consideration exceeds £1,000). But if your share issue is structured alongside a transfer — for example, a founder selling shares alongside a new allotment — the transfer element may attract stamp duty at 0.5%.
• Share premium and distributable reserves. The share premium account is not distributable profit. Founders who treat it as working capital create accounting problems that surface at the worst possible time.

Important: this guide covers the company law process of issuing shares. It is not tax advice. Share pricing, valuation, and structuring all have tax implications that depend on your specific circumstances. If your share issue involves significant value, employee shareholders, or non-cash consideration, speak to a qualified tax adviser before proceeding.

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 by special resolution), the allotment is voidable. An unhappy existing shareholder can challenge the entire round in court.
2. Not filing the SH01 within one month. The clock starts from the date of allotment, not the date the money lands, not the date the certificates are issued, and not the date you "get round to it". Miss the deadline and every officer of the company is liable.
3. Allotting without authority. If your articles restrict the directors' power to allot and you have not obtained a Section 551 resolution, the allotment still stands — but the directors who authorised it have committed a criminal offence. This tends to emerge during due diligence and invariably needs to be retrospectively cleaned up.
4. Issuing shares below nominal value. This is prohibited 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 point, you need to subdivide the shares first (e.g. split each £1 share into 100 shares of £0.01) — which is a separate legal process.
5. Getting the statement of capital wrong. The statement of capital on the SH01 must show the company's total share structure after the allotment — not just the new shares. Getting the totals wrong creates a mismatch with your confirmation statement and accounts that takes time and money to resolve.
6. 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 more than 25% of shares or voting rights), that person needs to complete identity verification before certain filings can be made.

This is a 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.

The complete share issue checklist

Here is the full process at a glance. Every step matters, and the order matters:

1. Check your articles — confirm directors have authority to allot (Section 550 or 551) and identify any pre-emption or consent requirements.
2. Get the right approvals — board resolution to allot, plus shareholder resolutions to disapply pre-emption rights and/or grant Section 551 authority if needed.
3. Allot the shares — the board resolution takes effect and the shares legally come into existence.
4. Update statutory registers — register of members, register of allotments, and PSC register (if applicable, within 14 days).
5. Issue share certificates — within 2 months of allotment.
6. File SH01 with Companies House — within 1 month of allotment, including the accurate statement of capital.
7. Confirm on your next CS01 — ensure the next confirmation statement reflects the updated share structure.

How Filing HQ makes share issues painless

Issuing shares touches your articles, multiple resolutions, statutory registers, share certificates, Companies House filings, and potentially PSC and identity verification requirements — all from a single transaction. Most founders do not issue shares often enough to have a system for it, which is exactly where things get missed.

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 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.