When it comes to owning company shares, there are a few different things you can do: transfer them, issue new ones or sell them. But what does each of these mean? And which one should you choose for your company?
Why do shareholders no longer want their shares?
A shareholder may wish to no longer be involved in a business and therefore will no not need their shares. This may be for a number of reasons:
– They may need the money and selling their shares is the quickest way to get it.
– They may not agree with the direction the company is going in and want to sell before the value of their shares decreases any further.
– They may have personal reasons for wanting to sell, such as retirement or emigration.
– It could even be that they have died and the issue is out of their hands.
What’s the difference between transferring shares and issuing shares?
According to Crest Legal:
“When you set up a private limited company, you will need to decide how many shares to issue. These are then allocated amongst the shareholders according to what has been agreed. Shares can be transferred between shareholders at any time, but it’s important to note that with a share transfer, it doesn’t increase or decrease the number of shares that are already in circulation.
Issuing shares creates new shares. “
There are a few reasons for a business to issue new shares. One of the most frequent is when a company wishes to raise money from investors and provide them with a large stake in the company. It can also be employed as part of a business sale or consolidation, or as part of employee or director bonuses.
When would a shareholder look to transfer?
One of the most typical reasons for a shareholder to transfer their ownership is to sell them in order to raise money or even remove themselves from the company.
They may also want to gift them to someone else or transfer them as part of a divorce settlement.
Other common types of share transfer include:
- Transfer to another business partner
- Transfer on the death of an existing member shareholder
- Transferring shares as part of a corporate restructure
What are the steps involved in transferring shares?
The process of transferring shares is not as simple as just passing them over to the new shareholder. There are a few steps that need to be followed in order for the transfer to be legal:
1. Both parties must agree to the share transfer and sign a share transfer form.
2. The company’s Articles of Association should be checked to see if there are any restrictions on the transfer of shares.
3. The form must be sent to Companies House along with the company’s latest annual return.
4. The new shareholder must be registered with Companies House.
5. The old shareholder must send their share certificate to the new shareholder.
How do you sell shares?
The process of selling shares is similar to that of transferring them. The main difference is that, as well as the company’s Articles of Association, the shareholders’ agreement will also need to be checked for any restrictions on the sale of shares.
Other than that, the steps are the same:
1. Both parties must agree to the share sale and sign a share transfer form.
2. The form must be sent to Companies House along with the company’s latest annual return.
3. The new shareholder must be registered with Companies House.
4. The old shareholder must send their share certificate to the new shareholder.
5. The difference between the market value of the shares and the price paid by the new shareholder must be paid to HMRC as Capital Gains Tax.