Changes in shareholding must be reported.

A company’s shareholding can be changed in a number of ways to better suit the needs of the company and the shareholders, and these changes must be correctly reported to the relevant authorities.

Issuing shares

A company can issue new shares to employees, investors, or existing shareholders as a reward for services provided, in exchange for investment or to alter shareholding ratios. Share issues need to be reflected in the company accounts and reported to Companies House. There can also be personal tax consequences for the shareholders.

Selling shares

A company’s memorandum and articles of association often contain rules that restrict a shareholder’s rights to sell their shares and it is important that these rules are complied with. In addition there are often stamp duty costs associated with a share sale and stock transfer forms must be submitted to HMRC recording this liability.

Subdividing, consolidating and re-designating shares

A company can subdivide its existing shares into a greater number of shares with a correspondingly reduced nominal value (e.g. dividing £1 share into 100 1p shares) or consolidate a number of shares into fewer shares. Subdivision is often done prior to a round of external investment so that the existing shareholders can maintain their control.

A company can also re-designate certain shares into a separate class of shares which can then have their rights varied in comparison to the rights attached to the other shares, such as voting or dividend rights.

All these changes need to be reported to Companies House, and a re-designation may require the agreement of the shareholders, where the rights attaching to the re-designated shares are varied.

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