Allotting new shares is one of the most common ways for a UK limited company to raise money, bring in a new investor, reward a team member or restructure ownership. But issuing shares is not simply a matter of agreeing that someone should receive them. The company must have the authority to allot the shares, consider shareholder pre-emption rights, complete the necessary corporate approvals and notify Companies House correctly.

For a straightforward private company, the process can be relatively simple. For a company with multiple shareholders, different share classes, an investment round or complex articles of association, it can become considerably more involved. This guide explains how to allot new shares in a UK limited company, what Companies House needs, the documents you should prepare and the mistakes that can create problems later.

Important: This article provides general information about UK company administration and is not a substitute for legal or tax advice. If the allotment involves significant investment, unusual share rights, non-cash consideration or complicated shareholder arrangements, professional advice is sensible.

What Does It Mean to Allot New Shares?

To allot shares means that a company gives a person an unconditional right to be issued with new shares. The important point is that an allotment is different from transferring existing shares. If John owns 1,000 shares and sells 200 to Sarah, Sarah receives existing shares from John. The company has not created additional shares.

If the company creates 500 new shares and issues them to Sarah, those are newly allotted shares. The company's total share capital increases and existing shareholders may be diluted. Companies House describes allotment as the process through which a person acquires an unconditional right to be issued shares. Shares are ultimately issued when the person is entered as a member in the company's register of members. This distinction matters because new share allotments require a Companies House filing, whereas a transfer of existing shares is dealt with differently.

Why Would a Company Allot New Shares?

There are several legitimate reasons to issue additional shares.

Raising investment

A startup may allot shares to an angel investor or venture capital investor in exchange for new funding. For example, a company with 10,000 existing shares could issue 2,500 new shares to an investor. The investor would then own 20% of the company if there are 12,500 shares in total.

Bringing in a business partner

A founder may allot shares to a new co-founder in exchange for capital, expertise, intellectual property or another agreed contribution.

Employee or management incentives

Companies may issue shares as part of an employee incentive arrangement, although specialist tax and legal considerations can apply depending on the structure.

Funding expansion

An established business may issue shares to raise capital for a new office, acquisition, technology investment or international expansion.

Restructuring ownership

A company may introduce a new share class or change its capital structure as part of a broader corporate restructuring. The key consideration is that issuing shares changes the company's ownership structure. Existing shareholders should therefore understand exactly what percentage they will own after the allotment.

Step 1: Decide What Shares You Are Allotting

Before filing anything, establish precisely what the company is issuing. You should determine:

• Number of new shares
• Class of shares
• Nominal value per share
• Issue price
• Whether the shares are fully paid
• Who will receive them
• Rights attached to the shares
• Whether payment will be in cash or another form

A UK company limited by shares can have different classes of shares, each potentially carrying different voting, dividend or other rights. For example, a company might currently have: 10,000 ordinary £1 shares and decide to allot: 2,500 new ordinary £1 shares at £10 per share.

The nominal value of the new shares would be £2,500, but the company would receive £25,000 if the shares are issued at £10 each.The difference between nominal value and the amount paid above nominal value is the share premium. This is why the allotment should be planned before the Companies House form is completed.

Step 2: Check the Company's Articles and Authority to Allot

One of the most important steps is confirming that the directors have authority to allot the proposed shares. Under the Companies Act 2006, directors generally need authority to allot shares. There are specific statutory rules and exceptions, including rules applicable to certain private companies with only one class of shares.

The company's articles of association should therefore be reviewed before the allotment. You should also check whether previous shareholder resolutions have already given the directors authority to allot shares. This is particularly important for older companies, companies with bespoke articles and businesses that have previously raised investment.

A practical check

Before proceeding, ask:

1. What do the articles say about share allotments?
2. Does the board currently have authority to allot?
3. Is shareholder approval required?
4. Is the proposed number of shares within any existing authority?
5. Are there restrictions attached to the proposed share class?

If the answers are unclear, obtain professional advice before issuing the shares.

Step 3: Check Pre-Emption Rights

This is one of the areas where a seemingly simple share issue can become legally complicated. Pre-emption rights can give existing shareholders the right to be offered certain new shares before they are offered to someone else. The purpose is to allow existing shareholders to protect their percentage ownership from dilution. For example, imagine:

• Alice owns 60%
• Bob owns 40%

The company wants to issue new shares to an outside investor. If Alice and Bob have applicable pre-emption rights, they may need to be offered the opportunity to subscribe for the new shares first, depending on the circumstances. The Companies Act 2006 contains statutory pre-emption provisions and mechanisms for those rights to be excluded or disapplied in certain circumstances.

The company's articles and any shareholders' agreement may also contain additional restrictions. Do not assume that a director can simply issue shares to a new investor because the company needs funding. Pre-emption rights should be checked before the allotment is approved.

Step 4: Obtain the Necessary Corporate Approvals

The next stage is to formally approve the allotment. Depending on the company's circumstances, this could involve:

• A board meeting
• Board minutes
• A board resolution
• An ordinary shareholder resolution
• A special resolution
• A resolution dealing with pre-emption rights

The precise requirements depend on the company's articles, existing shareholder agreements and the statutory authority available to the directors. For a simple company, the paperwork may be relatively straightforward. For an investment round, however, the documentation may also include:

• Investment agreement
• Subscription agreement
• Shareholders' agreement
• Updated articles
• Investor rights
• Share class documentation

The corporate paperwork should reflect the transaction that actually took place.

Step 5: Receive Payment or Other Consideration

Shares can be allotted in exchange for more than straightforward cash. Companies House guidance recognises that payment for shares in a private company can include cash, goods, services, property, goodwill, know-how and shares in another company. However, non-cash consideration can introduce additional legal, accounting and valuation issues.

For example, suppose a technology company wants to issue £50,000 worth of shares to a developer in exchange for intellectual property. That is substantially more complicated than a founder simply paying £1 for one ordinary share. Where shares are issued for assets, services or other non-cash consideration, professional legal and accounting advice is strongly recommended.

Step 6: Update the Company's Internal Records

Companies House filing is only part of the process. The company should also update its internal statutory records, including its register of members. This is particularly important because the register of members records who the company recognises as its members. You should also update relevant:

• Share certificates
• Register of allotments
• Register of members
• Shareholder records
• Board minutes
• Investment documentation
• Cap table

A common mistake is to file an SH01 at Companies House and assume the job is finished. It isn't. The Companies House record and the company's internal records should tell the same story.

Step 7: File Form SH01 With Companies House

The key Companies House filing for a new share allotment is Form SH01 — Return of Allotment of Shares. Companies House provides an online service for filing an SH01. The filing normally provides information about the allotment and the company's resulting share capital. You will need information such as:

• Date of allotment
• Number of shares allotted
• Class of shares
• Nominal value
• Amount paid or unpaid
• Share premium, where applicable
• Rights attached to the relevant share class
• Updated statement of capital

The statement of capital is particularly important because it shows the company's share structure after the allotment. Companies House requires a statement of capital when reporting changes to share capital, including details such as the total number of shares, their aggregate nominal value and the amount paid or unpaid.

When Must You File the SH01?

A company must notify Companies House of an issue of new shares within one month of the allotment. This deadline is easy to overlook, particularly when a company is focused on completing an investment transaction. For example:

Shares allotted: 10 August
SH01 deadline: 10 September

Do not leave the filing until the final day.Companies House recommends online filing where available, and its guidance notes that paper forms take longer to process.

What Happens to Existing Shareholders?

The biggest commercial consequence of a new share allotment is often dilution. Consider a company with:

• Founder A: 6,000 shares
• Founder B: 4,000 shares

There are 10,000 shares in total. The company then allots 2,500 new shares to an investor. After the allotment:

• Founder A: 6,000 / 12,500 = 48%
• Founder B: 4,000 / 12,500 = 32%
• Investor: 2,500 / 12,500 = 20%

Neither founder has lost shares. But both now own a smaller percentage of the company. This is why share allotments should be considered in terms of ownership percentage, voting power and economic rights, not merely the number of shares being issued.

A Simple Example: Allotting Shares to an Investor

Imagine GreenTech Solutions Ltd has 100 ordinary shares. The founder owns all 100. An investor agrees to invest £25,000 for 25 new ordinary shares. The company therefore has:

The company should:

1. Confirm the proposed share issue.
2. Check its articles.
3. Confirm directors' authority.
4. Consider pre-emption rights.
5. Obtain required approvals.
6. Receive the investment.
7. Allot the shares.
8. Update its register of members.
9. Issue the relevant share certificate.
10. File SH01 with Companies House within one month.
11. Update the company's ownership records and cap table.

If the investor becomes a person with significant control (PSC), additional Companies House requirements may arise.

What If the New Shareholder Becomes a PSC?

A PSC is generally someone who meets one or more statutory conditions for significant control over a company. An allotment can change the company's PSC position. For example, if a new investor acquires more than 25% of the company's shares or voting rights, the company may need to update its PSC information.

This should not be treated as an automatic consequence of every allotment. The company's ownership and control structure should be assessed against the PSC rules. Companies House identifies PSC information as part of the company's ongoing filing responsibilities.

Do You Need to Update the Confirmation Statement?

An allotment is an event-driven change and should not simply be left until the next confirmation statement. he SH01 should be filed within the one-month deadline. The company's confirmation statement may subsequently reflect the updated share and shareholder information as required. This distinction is useful: SH01: reports the allotment of new shares.

Confirmation statement: confirms that the company's registered information is up to date and can include relevant share structure information. Do not use the confirmation statement as a substitute for filing the SH01.

Common Mistakes When Allotting New Shares

Issuing shares without proper authority

Directors should confirm their authority before approving an allotment.

Ignoring pre-emption rights

Existing shareholders may have statutory or contractual rights that need to be addressed.

Confusing allotment with transfer

Issuing new shares and transferring existing shares are different transactions with different filing implications.

Getting the percentages wrong

A surprisingly common problem is agreeing an investment percentage without calculating the resulting post-money share capital correctly.

Filing the wrong share class

If the company has ordinary, preference or other classes, the SH01 needs to accurately reflect the shares being allotted and their rights.

Forgetting the register of members

Companies House filing does not replace the company's own statutory records.

Missing the one-month deadline

The SH01 must be delivered within one month of the allotment.

Treating a complex investment like a simple filing

An investment involving preference shares, convertible instruments, non-cash consideration or bespoke investor rights deserves professional review.

Can You Allot Shares Online?

Yes. Companies House provides an online service for filing an SH01. Online filing is generally preferable when available because it can be quicker and reduces the risk of postal delays. However, the convenience of online filing should not be confused with simplicity of the underlying transaction.

Companies House is primarily receiving information about the transaction. It is not a substitute for obtaining the necessary corporate approvals or ensuring that the allotment complies with the Companies Act, the company's articles and relevant shareholder agreements.

When Should You Use a Solicitor or Accountant?

A straightforward allotment of ordinary shares in a small private company may be manageable with appropriate company secretarial support. Professional advice becomes particularly valuable when:

• A new investor is involved
• Shares have different rights
• Existing shareholders may be diluted significantly
• Pre-emption rights apply
• Shares are issued for non-cash consideration
• The company is raising substantial investment
• A new share class is being created
• Convertible instruments are involved
• An employee share scheme is being established
• The allotment could change PSC status
• The company's articles contain bespoke provisions

For international founders, the issue can be even more important. A UK company may be incorporated easily, but the ownership structure still needs to work from UK corporate, tax and investment perspectives. IncorpUK, for example, operates in the wider UK company formation and management space for global founders, where keeping corporate records and Companies House information aligned is an important part of ongoing company administration.

Frequently Asked Questions

How long do I have to file an SH01?

You must notify Companies House of a new share allotment within one month of the allotment.

Can I allot shares without shareholder approval?

Sometimes. The answer depends on the company, its articles, the applicable statutory provisions and any existing authority granted to the directors. Certain private companies have specific statutory exemptions, but you should check the company's circumstances before proceeding.

What is the difference between allotting and transferring shares?

An allotment creates or issues new shares from the company. A transfer moves existing shares from one shareholder to another.

Does issuing new shares dilute existing shareholders?

Usually, yes, if existing shareholders do not participate in the new issue. Their number of shares may remain unchanged while their percentage ownership falls.

Can shares be issued for services instead of cash?

Private companies can, in appropriate circumstances, allot shares for non-cash consideration, including services or other assets. However, valuation, legal, accounting and tax considerations can make these arrangements more complex.

Do I need to update Companies House when I allot shares?

Yes. A new share allotment must be reported to Companies House, normally using Form SH01, within one month.

Do I need to update the company's register of members?

Yes. Companies House filing does not replace the company's internal statutory records.

Can I allot shares to a new investor?

Yes, provided the company has the necessary authority and the allotment complies with applicable legal, constitutional and contractual requirements, including any relevant pre-emption rights.

Does a new shareholder automatically become a PSC?

No. PSC status depends on whether the individual or entity meets the relevant control conditions. An allotment can trigger a PSC change, but this needs to be assessed based on the resulting ownership and control structure.

Conclusion

Allotting new shares is a powerful tool for UK companies. It can bring in investment, introduce new business partners, incentivise employees and provide capital for growth without taking on traditional debt. But the SH01 filing is only the visible part of the process.

A properly executed allotment starts with deciding what is being issued, checking the company's articles and directors' authority, dealing with pre-emption rights and obtaining the appropriate approvals. The company then needs to update its statutory records, calculate its new ownership structure accurately and file the SH01 with Companies House within one month.

The most important principle is simple: treat a share allotment as a corporate transaction, not just an administrative form. When the legal approvals, shareholder rights, internal records and Companies House filing all tell the same story, the company's ownership structure remains clear, defensible and ready for its next stage of growth.