Issuing Shares: The SH01 Form Explained

Allotment versus transfer: know which one you are doing

The first thing to get straight is whether you are allotting shares or transferring them, because the paperwork is completely different. An allotment happens when new shares are created and a person acquires the right to be issued with them. The total number of shares in issue goes up, and the company's share capital increases.

A transfer is when existing shares change hands from one person to another. No new shares are created and the total share capital does not change. Companies House is not notified of a share transfer at the time it happens. The change is recorded internally in the register of members and reported later on the annual confirmation statement.

Section 617 of the Companies Act 2006 confirms that a limited company may increase its share capital by allotting new shares in accordance with the Act. So issuing new shares is one of the specific, permitted ways to alter your share capital. If you are only moving existing shares between people, you do not file SH01. If you are creating and issuing brand new shares, you do.

Who has authority to allot new shares

Directors cannot simply issue shares whenever they like. Section 549 of the Companies Act 2006 says the directors must not exercise the power to allot shares except in accordance with section 550 or section 551. A director who knowingly contravenes this commits an offence, although the Act is clear that a breach does not invalidate the allotment itself. The risk falls on the directors, not on the person receiving the shares.

The simplest route is section 550. Where a private company has only one class of shares, the directors may allot shares of that class unless the company's articles prohibit them from doing so. Many small companies formed with model articles fall into this category, so their directors already have the authority they need without a separate resolution.

If section 550 does not apply, for example because the company has more than one class of shares, the directors need authorisation under section 551. This authority is given by the articles or by a resolution of the company. The authorisation must state the maximum number of shares that may be allotted under it and a date on which it expires, which must be not more than five years from the resolution or, if given in the original articles, from incorporation. It can be renewed for further periods of up to five years and can be revoked or varied by resolution at any time.

Pre-emption rights: offer to existing shareholders first

Before you allot new shares to a newcomer, remember your existing shareholders. Section 561 of the Companies Act 2006 gives them a right of pre-emption. A company must not allot equity securities to a person unless it has first offered those securities to existing ordinary shareholders in a proportion as nearly as practicable equal to their existing holdings, and the offer period has expired or every offeree has accepted or refused.

The purpose is to protect shareholders from having their stake diluted without a chance to maintain their percentage. A shareholder can renounce the right in favour of someone else, and shares held in treasury are left out of the calculation.

Pre-emption rights can be disapplied. Under section 569, the directors of a private company that has only one class of shares may be given power, either by the articles or by a special resolution, to allot equity securities as if section 561 did not apply, or applied with modifications the directors decide. This is why investment rounds are usually preceded by shareholder resolutions: the company needs both allotment authority and, where appropriate, a disapplication of pre-emption rights before it issues the new shares.

The one-month deadline for form SH01

Once shares have been allotted, the clock starts. Section 555 requires a company limited by shares to deliver a return of the allotment to the registrar within one month of making it. The return is form SH01, described by Companies House as the way to give notice of shares allotted following incorporation.

If you make several allotments over a short period, you do not have to file a separate form for each one. Companies House guidance confirms you can notify a series of allotments on the same SH01, but the form must reach them no later than one month after the date of the first allotment, and the statement of capital must reflect the company's position after the last allotment in the series.

SH01 can be filed online through the Companies House service or on paper by post. Companies House notes that paper forms sent by post take longer to process and encourages the online route so your public record is updated quickly. Filing online also reduces the chance of a rejection for a simple error, because the service validates the figures as you go.

The one-month deadline is not something to leave to the last minute. It runs from the date of the allotment, not from the date you finalise the paperwork or receive payment, so agree the allotment date clearly and diarise the filing. If a company misses the deadline, section 555 read with the wider allotment provisions allows a person liable for the default to apply to the court for relief, and the court may extend the time for delivery for such period as it thinks proper. That is a remedy of last resort, not a substitute for filing on time, and it involves cost and delay that a prompt filing avoids entirely.

What the statement of capital must show

The heart of SH01 is the statement of capital. This is a snapshot of your company's issued share capital at the date the return is made up to. Section 555 and the Companies House guidance set out what it must contain, and the figures need to be accurate because they become part of the public record.

For the company as a whole, the statement gives the total number of shares and their aggregate nominal value. For each class of shares it gives the prescribed particulars of the rights attached to that class, the total number of shares in the class, the aggregate nominal value of that class, and the aggregate amount, if any, unpaid on those shares. The unpaid figure covers amounts unpaid whether on account of the nominal value of the share or by way of premium.

Two distinctions matter here. The nominal value is the fixed face value of a share, often one penny or one pound, and it is what determines your share capital. Anything paid above the nominal value is share premium. Separately, a share can be fully paid or only partly paid: the paid-up amount is what the shareholder has actually contributed, and the unpaid amount is what they still owe. The statement of capital captures both the nominal position and the amount that remains unpaid.

Filling in the allotment details on SH01

Alongside the statement of capital, SH01 asks for the details of the allotment itself. You provide the company number and name and the date, or the range of dates, over which the shares were allotted. You then set out, for each class, the currency, the number of shares allotted, the nominal value of each share, and the amount paid and unpaid on each share.

Where shares are issued for something other than cash, for example in exchange for services, assets or the release of a debt, the form asks you to describe the non-cash consideration. This transparency matters because it explains how the shares came to be paid up without money changing hands.

Accuracy is worth the effort. The statement of capital feeds directly into your public record and into future filings such as the confirmation statement. If the numbers on SH01 are wrong, every later document that relies on them inherits the error. Take the time to reconcile the form against your register of members and any board minutes before you submit.

It also helps to keep supporting documents together. Board minutes recording the decision to allot, any shareholder resolution granting authority or disapplying pre-emption rights, and the updated register of members should all point to the same figures that appear on SH01. When those records are consistent, your filing is quick to complete and easy to defend if anyone ever queries how the shares came to be issued.

Conclusion

Issuing shares is a straightforward process when you take it in the right order. Confirm you are allotting new shares rather than transferring existing ones, check that the directors have authority under section 550 or a section 551 resolution, deal with pre-emption rights either by offering to existing shareholders or disapplying them under section 569, and then issue the shares and update your register of members. Only then do you file form SH01, and you have one month from the allotment to do it.

The statement of capital is the part that trips people up, so treat the nominal value, share premium and paid-up figures with care and reconcile them against your records before you submit. Do it well and your public record stays clean, your directors stay protected, and your cap table matches reality. If you are setting up a company and want a share structure that is easy to manage from day one, our company formation service sets you up correctly, and you can talk to our team if your allotment is anything out of the ordinary.

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