Correct way to issue more shares

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businessmanuk

  • #1
    I have formed a company with myself and another shareholder initially given 1 share each. We each have been issued a share certificate for our 1 share. However now we have agreed to allot more shares to me (for example another 8), giving me control of the company.

    I was wondering what is the correct way to do this - should I cross my existing share certificate through and be issued with another share certificate for 9 shares (the new total), and similarly cross out the record in the shareholder register and write a new one for me, or should I instead keep the certificate for 1 share and then issue another certificate for the 8 shares, and write another entry in the register to record this? Or does it not matter which way it is done?

    Thank you.
     
    stugster

    stugster

    Free Member
    Feb 1, 2007
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    Edinburgh, UK
    considerit.com
  • #2
    It's very unsual (imo) for a company to only have 2 shares. Normally when incorporating a company, I use a minimum of 1000, and allocate myself over 50%. Did you incorporate the company yourself through Companies House or did you use an Incorporation Company like QuickFormations? If it's QuickFormations, just log in to your account and update it then send off the return.

    As far as I'm aware, Companies House just go by the current record they hold, and a change like this isn't difficult. As for the hard-paper certificate side of things, it's entirely up to yourself. It would look best having a brand new certificate rather than crossing an old one through - more professional too. I don't physically have a certificate for my company, it's all stored at Companies House :eek:
     
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    businessmanuk

  • #3
    Yes I used an incorporation company. I have 1000 pounds in authorised capital however only 2 shares were initially allotted.

    Thanks for the advice - I will issue a new paper certificate for the shares and let Companies House know with form 88(2) I believe.
     
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    snowch

    Free Member
    Sep 15, 2008
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  • #5
    I have just had a company setup and I have one £1 share allocated to me.

    I would like to allocate one £1 share to my wife. I have got hold of form 88(2), but I don't know what other steps I need to take.

    Do I need to issue a share certificate? If I do, I have bought a share certificate from lawpack, and I don't have a company seal. Therefore, do I just need to fill out the certificate and sign it as the company's only director? Or, do I need a witnesses to sign the certificate also?

    Do I then pay the £1 into the company bank account and allocate it to a share capital account in the balance sheet?

    Many thanks in advance...

    Chris
     
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    David Griffiths

    Free Member
    • Jun 21, 2008
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  • #6
    You hold a board meeting. You pass a resolution to allot one share to Mrs Snowch. Fill that in on the 88(2) and submit it,

    Prepare the share certificate. It usually requires two signatures - either two directors or director and secretary. If you have only one director and no secretary, then one signature it is! You don't need to have it witnessed

    And as you say, pay the £1 and credit to share capital.

    You should also write up the register of members with the new shareholder. It wouldn't be unusual if that wasn't done! ;)
     
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    lukas

  • #9
    I have incorporated my business with 1000 shares £1 each. They all have been issued to me do I need to pay in £1000 to my company bank account?

    And how the number of shares alloted is related to real value of company. Say if someone would like to invest money into my company how to establish present price of shares?

    Sorry, but I don't know if it makes any sense to you :|
     
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    mahutchinson

  • #10
    It is not necessary for the share capital to reflect the value of the company. If you issue one share then that can be worth the whole value, if you issue two then they can be worth 50% each etc. etc. You don't need to fully pay up the shares - they can be part paid or left completely as a debt. There should be some agreement in place regarding paying up the balance - calls on shares and the procedure, and what happens if the call is not complied with. Of course, this is more important when other shareholders are involved. Note, however, that subscriber shares (shown at the back of the memorandum and articles) must be fully paid.
     
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    lukas

  • #11
    Ok but how to estimate value of each share after some amount of time. When I've incorporated my company was small now it's geing bigger so the value in shares is not equal to value of company and amount of money I'll have to pay to shareholders will be not relevant in any way to amount they have invested? I'm really new on this so please be patient:)
     
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    Free Lance

    Free Member
    Jul 3, 2008
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    Surrey
  • #12
    To reinforce what has been said before, once you have paid for your shares there is no obligation at all for (a) the face value of the shares or (b) the amount you have paid the company for your shares to represent its true value.

    There are some rules: If you have 1000 shares of £1 each face value you will at some stage have to pay £1,000 to the company. But once you have paid that you never have to contribute again.

    As a simple example, let's say your company has a value of £100,000, because it has more trading assets than liabilities. If you are the only shareholder it does not matter if you (a) had one share of £1 face value or (b) 100,000 shares of £1 face value. In the example in (a) your 1 share would be worth £100,000 if you were to sell it. In example (b) each of your 1000 shares would be worth £100. If you were to sell them all then there is no difference.

    That is a very simple example which only really works where there is one shareholder and you are selling all your shares.

    Think of shares as little slices of pie - the company being the pie. The size of the pie can increase or decrease over time as the company increases or decreases in value. However, the number of slices of pie will always remain the same - their underlying value goes up and down as well.

    If you are taking on an investor then it gets complicated. Taking the example above. Assume the investor buys 250 of your shares. He would have 25% of your company. However, that is not very valuable because you would be able to outvote him on important matters. So 25% might only be worth £10,000 to the investor, not £25,000 as you might think.

    That's a starting point. Hope it helps.
     
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    mahutchinson

  • #14
    The company must have a set of registers made up to date by law so if you don't have these then either the formation agent still has them or you got a real bargain basement formation and need to purchase a set. Any changes to the company not recorded in the registers are not considered legal. This is one of the reasons I don't like very cheap agents as they don't provide items and information required by law which could get you into trouble later. Regarding your valuing shares question, yes of course the value of the company changes over time and you have to revalue the business each time you want to issue shares otherwise you will be over or undervaluing the business and over or undercharging the investor.
     
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