A share allotment is when a company creates and issues new shares to a person or entity. It is the legal mechanism for raising new equity, bringing in a co-founder, or rewarding an investor. The form to file at Companies House is SH01, and you have one month from the date of allotment to do so. You will also need to update your register of members and check Persons of Significant Control thresholds.

This guide covers what allotment actually is (and how it differs from issue and transfer), when you need shareholder authority, how pre-emption rights work, and the five-step process for getting an allotment done correctly.

Allotment vs issue vs transfer

Three terms get confused regularly:

  • Allotment is the creation of new shares — the company decides to bring new shares into existence and assigns them to a person.
  • Issue is often used loosely as a synonym for allotment, but technically it refers to the moment shares are entered in the register of members. Allotment is the legal commitment; issue is the formal completion.
  • Transfer is the change of ownership of existing shares from one person to another. No new shares are created; the company’s overall share capital does not change.

Allotment is what you do when you bring in new investment or new co-founders. Transfer is what you do when one shareholder sells to another.

When directors need shareholder authority to allot

Under Companies Act 2006 sections 549 to 551, directors need authority to allot shares. The authority can come from two sources:

  • The articles of association. Most modern model articles for private limited companies with one share class give directors authority to allot without further shareholder approval.
  • An ordinary resolution of shareholders if the articles do not provide authority, or if the company has more than one share class.

Private companies with one class of shares formed since October 2009 are usually in the simpler position — directors generally have inherent authority unless the articles restrict it. Companies with multiple classes, or older companies with bespoke articles, more often need an ordinary resolution.

Always check your articles before allotting. The penalty for allotting without authority is personal liability for the directors who approved it, and the allotment itself can be invalidated.

Pre-emption rights

Section 561 of Companies Act 2006 creates statutory pre-emption rights. New shares allotted for cash must first be offered to existing shareholders in proportion to their existing holdings. This protects shareholders against dilution.

You can disapply pre-emption rights in three ways:

  1. The articles of association exclude or modify section 561 (common in many private company articles).
  2. A special resolution of shareholders disapplies pre-emption for a specific allotment.
  3. A general disapplication is granted by special resolution, lasting up to five years.

Section 561 only applies to allotments for cash. Allotments for non-cash consideration (such as shares for services, IP, or a business acquisition) are not caught by the statutory regime, though articles may impose contractual pre-emption.

The allotment process step by step

The standard five-step process:

  1. Board resolution. The directors meet (or sign a written resolution) and approve the allotment, the price, and the recipients.
  2. Shareholder consent if needed. If directors lack authority under the articles, pass an ordinary resolution. If pre-emption needs disapplication, pass a special resolution. Both can be by written resolution.
  3. Allotment letter or subscription agreement. Document the terms with the recipient, including consideration, payment timing, and any warranties.
  4. Update the register of members. This is what legally completes the issue. Until the recipient is on the register of members, they are not a shareholder. Update the register on or shortly after the allotment date.
  5. File Form SH01 with Companies House within one month. The form records the new shares allotted, the consideration, and the resulting statement of capital.

Issue share certificates to the new shareholders within two months of allotment under section 769 of Companies Act 2006.

Form SH01: what to include

Form SH01 captures the technical details of the allotment:

  • Class of shares allotted (ordinary, preference, etc.)
  • Nominal value per share
  • Number of shares allotted
  • Amount paid up per share, including share premium
  • Consideration if non-cash (with description)
  • The resulting statement of capital across all share classes after the allotment

Filing is via WebFiling or the Companies House API. There is no fee.

For the broader operational view of how to actually run an issue end-to-end including documentation, see our step-by-step guide on how to issue shares in a private limited company.

After the allotment: registers and PSC

Three post-allotment housekeeping items:

  • Register of members. Update with the new shareholder’s details — name, address, number of shares, class, and date of allotment.
  • Register of allotments. Maintain a record of all allotments, separate from the register of members.
  • PSC review. A new shareholder may cross a Persons of Significant Control threshold (more than 25%, more than 50%, or more than 75% of shares or voting rights). Update the PSC register and notify Companies House of any change within 14 days using Form PSC01 to PSC07 as relevant.

Key takeaways

  • Allotment creates new shares; transfer moves existing shares between people
  • Directors need authority to allot, either from articles or by shareholder resolution
  • Section 561 pre-emption rights apply to cash allotments unless disapplied
  • File Form SH01 within one month of allotment
  • Update register of members; the register is what makes the new shareholder legally a shareholder
  • Check PSC thresholds — a new shareholder above 25% triggers PSC notification

Frequently asked questions

What is a share allotment? A share allotment is the creation and issue of new shares by a company to a person or entity. It increases the company’s share capital, unlike a transfer which moves existing shares between people.

How long do I have to file Form SH01? One month from the date of allotment, under section 555 of Companies Act 2006. Late filing can result in penalties for the company and personal liability for officers in default.

Do I need shareholder consent to allot new shares? It depends on your articles of association. Private companies with one class of shares often grant directors automatic authority. Otherwise, an ordinary resolution of shareholders is required. Pre-emption disapplication separately requires a special resolution.

What are pre-emption rights? Pre-emption rights under section 561 of Companies Act 2006 require new cash-allotted shares to be offered to existing shareholders pro rata to their holdings, before being offered to outsiders. They protect against dilution and can be disapplied by special resolution or in the articles.

Do I need to update the register of members after an allotment? Yes, and this step is what legally makes the recipient a shareholder. The Companies House SH01 filing is a separate notification but does not by itself transfer ownership.

Useful resources

Companies House — File Form SH01 https://www.gov.uk/government/publications/return-of-allotment-of-shares-sh01

GOV.UK — Companies Act 2006 https://www.legislation.gov.uk/ukpga/2006/46/contents

Companies House guidance — Persons of Significant Control https://www.gov.uk/guidance/people-with-significant-control-pscs