I have a client who has the following issue and would like your views on this matter:
When setting up their company, the client registered the company with CH as having 1 Ordinary share - owned by one shareholder. From what I understand, they were unaware of the rules.
Now, they are enquiring whether they are able to change the number of shares issued - e.g. increase from 1 ordinary share to 1000, but still have one shareholder for now
Their reasoning for this is so in the future if they want to sell part of the business they still have a shareholding as they do not wish to hold 1/2 of a share
Your thoughts would be appreciated - can this be done? are there any implications? will this affect the accounting treatment?
-- Edited by NA_AA on Tuesday 10th of January 2012 11:30:33 PM
Depends on what the authorised share capital is for the company.
It is usually 100 or 1000 shares.
If 1000 shares then they can simply issue themselves another 999 shares by preparing the relevant companies house form, updating the statutory books and of course the shareholding paying for the shares. Assuming they have a nominal value of £1 would need to pay the company £999.
If the authorised share capital is less than 1000 shares would need to issue the relevant resolution to increase the authorised share capital and and the memo and art of assoc. This would probably require some professional input.
You can issue further shares. The authorised share capital is unlikely to be an issue as the Companies Act 2006 did away with this concept. Unless the articles say otherwise, there won't be an authorised share capital.
You will need to be careful that the directors have the relevant authority to allot the shares though.
The alternative would be to divide the one ordinary share of £1 into 1,000 ordinary shares of 0.1 pence each. This would mean that you client wouldn't have to put any more money in but they would have 1,000 shares to play around with.
