How to Issue New Shares in a UK Limited Company — Complete Guide (2026)

Allotment vs Transfer

Allotment: Creating new shares — total number of shares in the company increases. The company issues the shares directly to the new shareholder. Dilutes existing shareholders.

Transfer: Moving existing shares from one shareholder to another — total number of shares stays the same. No dilution (same overall pie, different slice sizes).

When a new investor comes in: typically via allotment (new money into company → company issues new shares to investor). When a founder exits: typically via transfer (sells their existing shares to someone).

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Step 1: Check Director Authority to Allot

UK company law (S.549-551 Companies Act 2006): Directors need authority to allot shares. Two sources of authority:

Model Articles: Companies using Model Articles (the default) give the directors authority to allot shares described in the Statement of Capital on incorporation. If you want to allot more shares than that: shareholder approval needed.

S.551 Resolution: Shareholders can pass an ordinary resolution (or provision in the Articles) giving directors authority to allot shares up to a specified amount, for up to 5 years. Most funded startups pass a standing S.551 resolution annually.

For most single-director/shareholder startups: the director IS the shareholder, so authority to allot is effectively inherent — they can allot to themselves or pass a shareholder resolution instantly (written resolution signed as sole shareholder).

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Step 2: Disapply Pre-Emption Rights (if allotting to a new party)

Existing shareholders have statutory pre-emption rights on new share allotments (S.561 Companies Act 2006) — they have the right to buy any new shares pro-rata to their existing holdings before shares are offered to outsiders.

• To allot shares to a new investor (who is not an existing shareholder): pre-emption rights must be disapplied. This requires:
• A special resolution (75% shareholder majority) under S.569/570, OR
• If the Articles expressly disapply pre-emption rights (common in funded startup Articles)

The disapplication resolution can be passed simultaneously with the S.551 authority resolution — combined into one document.

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Step 3: Board Resolution to Allot

• Directors pass a board resolution (or written resolution for a single-director company) formally approving the allotment:
• Number of shares to be allotted
• Share class
• Price per share (consideration)
• Name of the allottee (new shareholder)
• Date of allotment

Keep a copy in the company minute book.

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Step 4: Issue Share Certificate and Update Register of Members

Issue a share certificate to the new shareholder and update the Register of Members with their name, address, number of shares, date registered. These are internal records maintained by the company.

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Step 5: File SH01 at Companies House (within 1 month)

• Form SH01 (Return of Allotment of Shares) must be filed at Companies House within one month of the allotment. It contains:
• Company number
• Allotment date
• Number of shares allotted
• Amount paid / unpaid per share
• Updated Statement of Capital (showing total shares after allotment)

Fee: Free (no Companies House charge for SH01).

File via Companies House WebFiling or paper form. Late filing of SH01: Companies House can issue fines to the company and directors.

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Tax Issues When Allotting Shares

To employees or directors: If shares are allotted for less than market value, the difference is a "money's worth" benefit — taxed as employment income (income tax + NI) on the employee/director. HMRC actively scrutinises share allotments to employees.

Solution — EMI Options: Instead of allotting shares directly at below-market value, grant EMI options. The employee has the right to buy shares at a fixed price in the future. No income tax at grant (if exercise price ≥ market value at grant). CGT at 10% when they eventually sell — not income tax at 45%.

To investors: Allotting shares for cash to an arm's-length investor at a commercially negotiated price generally doesn't create a tax issue. If the investor is connected to the founders, HMRC may scrutinise whether the price is at market value.

Entrepreneurs' Relief / BADR impact: If new shares dilute a founder's holding below 5%, they may lose BADR eligibility. Monitor this carefully before each allotment round.

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FAQs

Can I allot shares for non-cash consideration (e.g., services)? Yes — shares can be allotted for non-cash consideration (IP assignment, services, equipment). HMRC treats the value of the consideration as the price — and if it's below market value, see the tax issues above. For private companies, no independent valuation is required by Companies Act (unlike public companies).

How quickly does Companies House update the share structure online? SH01 is processed within 2–10 working days of receipt. The updated share information appears on the public Companies House record when processed. Not a real-time system.

Can I create a new share class when allotting? Yes — you can allot a new class (e.g., B Shares, Preference Shares) provided the Articles authorise it. Creating a new share class often requires an amendment to the Articles (special resolution) and filing Form SH08 (notice of new share class).

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