You can issue more shares at any time once your company has been incorporated, and you need to update your company information by completing a Return of Allotment form for Companies House.
You may need a special resolution to change your company’s share structure. This includes if you: change the number of shares the company has and their total value – this is your ‘share capital’ (the part of your company’s money that comes from shares) change how your shares are distributed.
Share dilution is when a company issues additional stock, reducing the ownership proportion of a current shareholder. Shares can be diluted through a conversion by holders of optionable securities, secondary offerings to raise additional capital, or offering new shares in exchange for acquisitions or services.
Submit form SH01 to Companies House within one month of the share issue (this can be done online) Prepare a share certificate for each new shareholding. Send a letter to each of the shareholders letting them know about their new shareholdings and let them have a copy of their share certificate.
Increases in the total capital stock may negatively impact existing shareholders since it usually results in share dilution. That means each existing share represents a smaller percentage of ownership, making the shares less valuable.
Authority to allot new shares
Directors of companies with more than one class of shares need to obtain express authority to allot from the company’s shareholders. This is done by means of an ordinary resolution passed at a general meeting or using the 2006 Act written resolution procedure.
The number of authorized shares per company is assessed at the company’s creation and can only be increased or decreased through a vote by the shareholders. If at the time of incorporation the documents state that 100 shares are authorized, then only 100 shares can be issued.
Procedure of Right Issue of Equity Share
- Send Notice of Board Meeting in writing to every director at his address registered with the company by hand delivery or by post or by electronic means. …
- Pass the Resolution in Board Meeting for Right issue.
If you know the market cap of a company and you know its share price, then figuring out the number of outstanding shares is easy. Just take the market capitalization figure and divide it by the share price. The result is the number of shares on which the market capitalization number was based.
Procedure for increasing Share Capital of a Company
- Increase of Authorized Share Capital.
- Increase of Subscribed Share Capital. Allotment of Further Shares. Conversion of Debentures or Loans into Shares.
A company can increase its authorised share capital by passing an ordinary resolution (unless its articles of association require a special resolution). A copy of the resolution – and notice of the increase on Form 123 – must reach Companies House within 15 days of being passed. No fee is payable to Companies House.
Companies incorporated under the CA 1985 or earlier must pass an ordinary resolution, giving the directors authority to allot. If your company has more than one class of shares, then the directors will need to get express authority from their shareholders by means of an ordinary resolution to allot further shares.
The number of authorized shares is typically higher than those actually issued, which allows the company to offer and sell more shares in the future if it needs to raise additional funds.
In the stock market, when the number of shares available for trading increases as a result of management’s decision to issue new shares, the stock price will usually fall.