Introduction
Transferring or issuing shares in a UK limited company involves the sale or gift of existing shares by a shareholder to another individual. Share issuing (also known as share allocation) involves the creation of new shares by the company.
Both are often spoken about together, but they are distinct. This guide explains how to transfer shares in a private limited company, or issue new ones, step-by-step – including what forms to file and how to stay compliant.
Key Takeaways
- Different processes: Transferring shares changes ownership of existing shares, whereas issuing shares increases total share capital.
- Form and approval: Share transfers use a Stock Transfer Form (and may trigger stamp duty), with board approval and any required shareholder consents. New issues require board approval (and often a special resolution to waive pre-emption rights) and filing form SH01.
- Record updates: After any transfer or allotment, issue share certificates and update the statutory register of members and PSC register.
- Shareholder rights: Existing members often have pre-emption rights on new share issues or transfers. These can be waived by special resolution.
What’s the difference between transferring and issuing shares?
A share transfer is a transaction between individuals: an existing shareholder sells or gifts shares to another person. A transfer does not create new shares – the company’s share capital remains unchanged.
Issuing shares is a company action that creates new shares. Additional shares created in this way might be issued to raise investment, pay off debts, set up an employee share scheme, or bring in partners.
Transfers require a signed Stock Transfer Form (and sometimes stamp duty), whereas issuances require a board or shareholder resolution and a Return of Allotment (Form SH01) filed at Companies House. The choice depends on whether the company wants to reassign existing shares or create new ones.
Before proceeding, it’s helpful to clarify a few key terms used throughout this guide:
- Share transfer: Sale/gift of existing shares to another person
- Share issue: Creation of new shares by the company
- SH01: Companies House form for notifying new share allotments
- PSC: Person with significant control – someone who owns or controls 25%+ of the company
How to transfer shares in a limited company
Transferring shares in a limited company is relatively straightforward, but there are a few key considerations to be aware of.
1. Fill out a Stock Transfer Form
This form captures the company name and number, the class and number of shares being transferred, the names and addresses of the transferor and transferee, the amount paid (if any), and the transferor’s signature.
At 1st Formations, we have a Stock Transfer Form that you can download and fill out yourself.
2. Obtain board approval
Once your form has been filled out correctly, you need to send it to the other board members. The board of a company must approve the transfer of shares in a limited company.
Check the articles and any shareholders’ agreement – many give existing shareholders pre-emption rights. If such rights apply, those shareholders must be offered the shares or must waive their rights before the transfer can proceed.
Update the register of members immediately. If the transfer changes anyone’s control (e.g. crossing 25%), update the PSC register and file the appropriate PSC form(s).
3. Send to HMRC
Once the board has approved the transfer, you can send a copy of the transfer to HMRC for processing.
Remember – if the transfer involves a payment above £1,000, send a copy to HMRC within 30 days and pay 0.5% stamp duty. Certain transfers are exempt.
How to issue new shares after incorporation
Companies issue new shares to raise funds or bring in new members. The Companies Act 2006 does not limit how many shares a private company can issue, though the articles or a shareholders’ agreement might impose a cap.
1. Apply for the shares
A prospective shareholder must apply for the shares. Existing shareholders may need to consent. Under default law, existing shareholders have statutory pre-emption rights on new issues. If pre-emption applies, shareholders should waive it by special resolution if the company wishes to issue shares to others. The board then passes a resolution to allot the shares.
2. File an SH01 Form – what to include
Once the board resolves to allot shares, the company must file Form SH01 (Return of Allotment of Shares) at Companies House within one month. The SH01 requires the company name and number, date of allotment, number and class of shares, nominal value, statement of capital, and any special rights attached to the shares. Failing to file SH01 on time can incur penalties.
3. Issue share certificates
The directors should issue share certificates to each new shareholder and update the register of members and the PSC register if applicable. Copies of all share certificates must be kept at the registered office or SAIL address.
4. Update Companies House
In the next confirmation statement, update Companies House on the changes. Any new PSCs must be reported using the appropriate PSC forms before filing the confirmation statement.
Key shares documents and filings
| Document | Required for | When to file or deliver | Purpose |
|---|---|---|---|
| Stock Transfer Form | Transferring existing shares | Complete when transfer occurs. If the sale value is less than £1,000, send it to HMRC within 30 days | Lists company and share details; no Companies House filing (but must be reported in the next confirmation statement) |
| SH01 (Return of Allotment) | Issuing new shares | File with Companies House within 1 month | Provides details of each allotment |
| Confirmation Statement (CS01) | Updating shareholding info | Filed annually | Reports share capital changes and shareholder information |
| PSC register update | Changes in significant control | Notify Companies House before next confirmation statement | Required when someone’s percentage changes |
What are pre-emption rights?
Pre-emption rights protect existing shareholders from stock dilution. When a company allots new shares, existing members have a right of first refusal to buy a proportional number of the new shares. These rights can be waived for a particular issue if shareholders pass a special resolution.
Many companies’ articles also grant pre-emption rights on share transfers. Unlike new share allotments, the Act does not impose automatic pre-emption on transfers; any such right comes from the articles or a shareholders’ agreement.
If you plan to issue new shares or transfer shares to outsiders, check whether pre-emption rights apply.
Can directors authorise share transfers or issuances?
By default, directors can generally handle share transactions, subject to the articles and shareholder resolutions.
Share transfers
Directors must register transfers once the documents have been properly executed, although many articles grant directors the power to refuse transfers in certain circumstances. If the articles prohibit approval, shareholders must pass a resolution or amend the articles.
Share issuances
For most companies formed after October 2009 using model articles, directors automatically have the authority to issue shares without shareholder approval. Shareholders can restrict this power in the articles. If directors lack authority, shareholders must pass a resolution or amend the articles.
Directors usually can execute transfers and allotments unless restricted. Be sure to always verify the articles.
Understanding how to transfer or issue shares in a private limited company is essential to maintaining investor confidence, ensuring legal compliance, and preventing unnecessary delays with Companies House.
Nicholas Campion
Nicholas is Director, Company Secretarial at 1st Formations, responsible for completing the company’s statutory filings and ensuring all the company secretarial department is fully trained on company law and company secretarial procedures. Nick is also Company Secretary for the BSQ Group and all subsidiary brands, an accredited industry leader and a Companies Act 2006 specialist.
