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What is the procedure for issuing new shares

What is the procedure for issuing new shares

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Client has 4 shareholders taking up 100 shares betweeen them 36:31:10:23. They want to allocate a further 10 shares to the shareholder that currently owns 10 shares in return for a £5,000 investment in the Company. I have checked articles (CA 2006) and there is nothing specifically written in terms of whether this is permitted or not and so I am therefore concerned as to the correct legal procedure that needs to be undertaken including whether the articles need to be amended and given that there will be a dilution of existing shareholdings and one shareholder (23 shares) has no involvement in the business and presumably would need to at least be aware of this transaction?  

Any advice on this matter would be welcome.

Thank you

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By johngroganjga
06th Feb 2017 09:47

Why do you think the articles need to be amended?

Common sense says that the company needs to get the agreement of all its shareholders before issuing the new shares. I would look at doing that by a written resolution.

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Hallerud at Easter
By DJKL
06th Feb 2017 09:56

Have you read the CA 2006 itself, in particular s549-551?

These sections really need read in conjunction with the Company's Articles, and if unsure what rights various existing shareholders have legal assistance is strongly suggested.

http://www.legislation.gov.uk/ukpga/2006/46/section/549

Subject to these sections you may then need to consider the appropriate resolution and meeting required to empower the directors.

I presume there are no tax considerations re the £5,000 price agreed vis a vis the status of the intended recipient?

Thanks (1)
RLI
By lionofludesch
06th Feb 2017 10:03

I would echo DJKL's enquiry as to whether the £5000 is agreed by all to be a fair value.

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By Ruddles
06th Feb 2017 11:22

Why has this question been raised on an accounting/tax forum? While some of us here may have experience in dealing with such issues, it will depend on the circumstances of the case and as such it is a legal matter, with nothing to do with accounts and tax (other than the respective implications of the transaction once effected).

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Replying to Ruddles:
RLI
By lionofludesch
06th Feb 2017 11:32

Is it because there's no corresponding site for lawyers ?

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Replying to lionofludesch:
By Ruddles
06th Feb 2017 16:37

Or because legal advice costs money?

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Replying to Ruddles:
RLI
By lionofludesch
06th Feb 2017 16:42

So does accountancy advice.

But we're nicer people.

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Replying to lionofludesch:
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By Harrison88
06th Feb 2017 17:32

Most of us ;)

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