To issue new shares in a UK private limited company you need authority to allot (from your articles or a shareholder resolution), to handle pre-emption rights, to document the issue with a subscription agreement or allotment letter, to update your register of members, and to file Form SH01 with Companies House within one month. The issue is legally complete only when the recipient is entered in the register of members.

This guide covers the operational steps end-to-end, plus tax considerations and post-issue housekeeping.

Before you issue: check authority

Two checks before raising new equity:

Authority to allot

Under Companies Act 2006 sections 549 to 551, directors need authority to allot shares. The authority comes from one of:

  • The articles of association, which often grant directors authority to allot in private companies with one share class
  • An ordinary resolution of shareholders, where the articles do not provide authority

Private companies formed under the 2006 Act with one class of shares typically have automatic director authority unless the articles restrict it. Multi-class companies, and many older companies, need an ordinary resolution.

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 pro rata to their existing holdings. Disapplication is possible by:

  • Articles that exclude or modify section 561
  • A specific special resolution disapplying pre-emption for the proposed allotment
  • A general disapplication by special resolution, lasting up to five years

Pre-emption applies only to allotments for cash. Allotments for non-cash consideration (services, IP, business assets) sit outside the statutory regime.

Pre-emption rights in detail

The statutory regime is straightforward but easy to get wrong. The default position:

  1. Company decides to raise £100,000 by issuing 100,000 new £1 ordinary shares
  2. Existing shareholders must be offered the new shares pro rata to their current holdings — a 30% shareholder is offered 30,000 of the new shares
  3. The offer must be open for at least 14 days
  4. Shareholders who decline can have their slice redirected to others

For a private company raising from an external investor, the typical route is to disapply pre-emption by special resolution at or before the funding round. Without disapplication, new investors cannot buy in cleanly because the existing shareholders have a first-refusal claim.

For the conceptual basics including the difference between allotment, issue, and transfer, see our company share allotment guide.

The 5-step issue process

The standard sequence:

1. Board resolution

The directors meet and pass a resolution to issue new shares. The resolution sets the class, number, price (nominal value plus any premium), recipients, and the date of the issue.

2. Shareholder resolution if needed

If the 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 for a private company.

3. Allotment letter or subscription agreement

Document the terms with the new shareholder. For simple internal issues (a co-founder taking up new shares), an allotment letter is enough. For external investors, a subscription agreement is standard and includes:

  • Class of shares and number
  • Subscription price (nominal plus premium)
  • Payment timing (typically immediately on completion)
  • Warranties from the company and existing shareholders
  • Any conditions precedent
  • PSC declaration from the new shareholder

4. Update the register of members

This is what legally completes the issue. Until the new shareholder is entered in the register of members, they are not a shareholder, regardless of any other documentation. Update the register on or shortly after the allotment date with the new shareholder’s name, address, number of shares, class, and date of allotment.

5. File Form SH01

Within one month of the date of allotment, file Form SH01 with Companies House. The form records the new shares allotted, the consideration received, and the resulting statement of capital across all classes. Filing is via WebFiling or the Companies House API. There is no fee.

Issue share certificates within two months of allotment (CA 2006 s.769).

Drafting the subscription agreement

Key clauses to include for an external-investor subscription:

  • Subscription details. Class, number, price, timing.
  • Conditions precedent. What needs to happen before completion (legal due diligence, regulatory consents, board approvals).
  • Warranties. The company and founders typically warrant key facts about the business, accounts, ownership, and IP.
  • Disclosure letter. Sets out exceptions to the warranties.
  • Restrictive covenants. On founders, including non-compete and non-solicitation.
  • Information rights. Investor rights to monthly or quarterly accounts, board observer rights, and major-decision veto rights.
  • Anti-dilution and pre-emption. Some investors negotiate continuing pre-emption rights or anti-dilution protection.
  • Drag-along and tag-along. Often included by reference to the shareholders’ agreement and articles.
  • Completion mechanics. Where money is paid, where shares are issued, what documents change hands.

Most external rounds use a separate shareholders’ agreement to capture longer-term governance, with the subscription agreement covering the financing transaction.

Tax considerations

Three tax angles every founder should think about before issuing shares:

SEIS or EIS advance assurance

For shares issued to UK individual investors, SEIS or EIS tax relief can dramatically improve the appeal of the offer. SEIS gives 50% income tax relief for investors on up to £200,000 of investment per year, with a £500,000 lifetime company cap. EIS gives 30% income tax relief, with new £10 million annual limits from April 2026 (£20 million for knowledge-intensive companies).

To give investors confidence the relief will be available, apply to HMRC for advance assurance before completing the round. Turnaround is typically four to eight weeks.

Stamp duty

Stamp duty does not generally apply to share issues by a UK private company (it applies to transfers of existing shares, not to the issue of new ones). There are exceptions for certain restructurings.

Director loan account vs share issue

Some founders fund their company by lending money rather than buying shares. The trade-off:

  • A director loan can be repaid tax-free
  • Share issue dilutes existing holders but builds equity capital
  • Loan-to-equity conversion mid-flight has tax and structuring implications

Take advice from an accountant before choosing the route, particularly where SEIS or EIS is in play.

After the issue: housekeeping

Three immediate post-issue items:

  • PSC review. A new shareholder above 25% triggers PSC notification. Update the company’s PSC register and file the relevant PSC form within 14 days.
  • Share certificate. Issue within two months of allotment (s.769).
  • Accounts disclosure. The new shares appear in your next set of accounts under capital and reserves.

Key takeaways

  • Authority to allot from articles or ordinary resolution; pre-emption disapplication if needed
  • Document with allotment letter (simple) or subscription agreement (external investor)
  • Update register of members — that completes the issue legally
  • File Form SH01 within one month
  • SEIS or EIS advance assurance before completing investor rounds
  • PSC review and share certificate within two months

Frequently asked questions

What is the difference between issuing and allotting shares? Allotment is the legal commitment to bring new shares into existence. Issue is the formal completion when the recipient is entered in the register of members. The terms are often used interchangeably in practice.

Do I need shareholder consent to issue new shares? It depends on your articles and whether pre-emption applies. Private companies with one share class often have director authority to allot without further consent, but pre-emption disapplication for cash issues to outsiders typically needs a special resolution.

What is SEIS advance assurance? A pre-clearance from HMRC that the proposed share issue will qualify for SEIS or EIS tax relief. It gives investors confidence before they commit. Turnaround is typically four to eight weeks.

How long do I have to file Form SH01? One month from the date of allotment under Companies Act 2006 section 555. The form records the new shares and the resulting statement of capital.

Do I need a subscription agreement for every share issue? For external investors yes — it captures the warranties, completion mechanics, and investor protections. For simple internal issues to existing founders or family members, an allotment letter and board minutes are usually sufficient.

Useful resources

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

HMRC — SEIS and EIS advance assurance https://www.gov.uk/government/publications/the-seed-enterprise-investment-scheme-introduction

Companies Act 2006 — Allotment of shares https://www.legislation.gov.uk/ukpga/2006/46/part/17/chapter/2