Known as the allotment of shares, the issuing of new shares – to either existing or new shareholders – should not be confused with a share transfer, which involves the transfer of existing shares.
An allotment of shares might be conducted for a variety of reasons, such as to raise money for the company, introduce new investors, convert loans to share capital, create a golden share, put a group structure in place, fund a redemption of shares or to implement a bonus issue or subdivision of shares.
Directors and existing shareholders are often confused by the concept of allotment and run into problems when attempting to give shares to new or existing shareholders. Without the required knowledge, the company may allot shares that do not exist or potentially allot an unsuitable class of share.
In addition to company secretarial issues, tax considerations can come into play. Where shares are issued below market value, there may be capital gains tax implications for existing company shareholders (as they are essentially giving away value in the company) and potential capital acquisition tax implications for the new shareholder(s).
The concept of allotment can be confusing, and without the required knowledge, a company may allot shares that don’t exist or an unsuitable class of share
For advice on pending or proposed share allotments, email us or call us on 053-9100000. We look forward to working with your practice.
How We Can Help
OmniPro is uniquely placed to offer both advice on allotments and assist with the execution of these transactions.
Our combination of taxation experience and company secretarial knowledge allows us to provide a rounded service and identify any potential pitfalls that our clients may not have considered.
OmniPro will prepare all the required company secretarial documentation for the execution of the share allotment, providing you with peace of mind that the transaction has been completed in accordance with the relevant legislation.
Subject to instruction, we can also offer an analysis of the taxation impact of the proposed transaction. Each allotment is priced based on the level of work and professional expertise required.
Steps Required to Execute an Allotment (not exhaustive and may vary):
Consider the tax implications of the proposed allotment (if requested by the client)
Review the company constitution (and possibly any shareholders agreement) to ensure that the company has sufficient authorised share capital to exercise the allotment and assess whether the directors have the power to allot shares and whether pre-emption rights apply
If a new class of shares is to be issued, determine the rights attaching to these shares
Arrange for a special resolution to be passed to permit the change to the constitution and / or give the power to allot shares
Amend the company constitution for the new share class, if applicable, and increase the authorised share capital as required
Hold and record a board meeting to recommend the allotment
Assist the shareholder in applying for the new shares and having the allotment approvided by the directors
Issue new share certificates as appropriate
File various forms (G1, G2 and B5) with CRO within the appropriate time frame as required
Include acquisition of the shares on the tax returns if applicable
For advice on pending or proposed share allotments or the variation on the rights of shares, email us or call us on 053-9100000. We look forward to working with your practice.