Return of Allotment of Shares - SH01 form

If your company has made the decision to allot new shares, you will need to complete and send a “Return of Allotment of Shares” form to HMRC. Allotting new shares is one of the main ways that companies raise funds and capital for new projects and expansion. As with all company filings and returns, it is important that you meet the required deadline for submitting the Return of Allotment of Shares form and that this is completed correctly. In this article, we will explain everything you need to know about a Return of Allotment of Shares, including the process you will need to follow, common mistakes to avoid, and who is responsible for allotting shares. 

Understanding the Concept of “Return of Allotment of Shares”

A “Return of Allotment of Shares” form (SH01) must be completed and submitted to the Registrar at Companies House when new shares are allotted (issued) by a company after registration. The form contains several items of information about the share allocation, including the number allocated and share classes.

Issuing new shares may be needed to raise capital, repay loans, fund growth, and reward staff with shares. For example, a company formed with one share may decide to increase the number of shares after registration to fund the development of a new product or service. 

The Legal Framework Governing Allotment of Shares in the UK

The allotment of shares is covered in the Companies Act 2006 under Chapter 2: Allotment of Shares: General Provisions. Section 555 specifically covers the return of allotment by a limited company. 

Paragraph 855 of section 555 states, “Within one month of an allotment of new shares in a limited company, the company is required to make a return of allotments to the registrar. This return must contain “prescribed information” relating to the allotment (that is, prescribed by the Secretary of State by order or by regulations made under the Act)”. 

Paragraph 856 states, “A return of allotments made under this section must be accompanied by a statement of capital. A statement of capital is, in essence, a “snapshot” of a company’s total subscribed capital at a particular point in time (in this context, the date to which the return of allotments is made up)”. 

The Process of Allotment of Shares: A Step-by-Step Guide

The process of allotment of shares can be completed online or by post. To complete this process online, you will need to:

Step 1: Before allotting new shares, 

  • Check your company’s articles of association if there is a restriction on the allotment of new shares (e.g. allotted shares may be restricted to existing shareholders)
  • Check whether authority to allot shares is required under section 550 or section 551 of the Companies Act 2006 or whether an exception applies.
    1. Under section 550, directors have the power to allot shares if there is only one share class. 
    2. Under section 551, if there is more than one share class, directors can only allot shares if they have authorisation by ordinary resolution of the company’s members or by the articles.
  • Check if there are any “pre-emption rights” whereby new shares must be offered to existing shareholders first, effectively giving them the right of first refusal.

Step 2: Allotting new shares

  • If allocating shares under Section 550
    • Hold a board meeting to approve an ordinary resolution to give the directors the necessary powers to allot shares.
  • If allocating shares under Section 551
    • Hold a board meeting to consider and approve the requisite members’ resolutions.  
    • Issue a notice of and hold a general meeting to pass the resolutions or circulate a written resolution for the allotment of shares.
  • Issue a share certificate for the allotted shares

Step 3: After new shares have been allocated:

  • File a “Return of Allotment of Shares” (form SH01) with Companies House (see below)
  • Update the company’s register of members in your next confirmation statement
  • Update the PSC register
  • Ensure that any new shares are reflected correctly in your company accounts (i.e. “Called up share capital” in your balance sheet).

The Importance of Filing a “Return of Allotment of Shares”

The penalties for not filing a “Return of Allotment of Shares” on time can be significant and can impact both the company and its officers. For this reason, compliance with this requirement is essential. 

Companies that do not submit a “Return of Allotment of Shares” with Companies House on time may face financial penalties. These penalties can vary depending on the length of the delay and the company’s size, ranging from hundreds to thousands of pounds.

In more serious cases of non-compliance or repeated offences, company officers may face prosecution. This may result in criminal convictions, fines, and even disqualification from serving as a director.

Non-compliance with the filing requirements for “Return of Allotment of Shares” can also negatively impact a company’s reputation, as it may be viewed as less trustworthy. This can, in turn, affect a company’s relationship with its customers, suppliers, and investors.

How to File a “Return of Allotment of Shares” with Companies House

The return of allotment of shares form can be completed online or by post. This must be done within one month of the new shares being allocated. To file your return of allotment of shares online, you will need to:

  • Login to the Companies House WebFiling service using your company login
  • Complete and submit form SH01 providing the following:
    • Company details
    • Allotment dates
    • Shares allotted (currency, class, number, nominal value, amount paid, and amount unpaid) and prescribed particulars for each share class (e.g. voting rights).
    • Statement of capital – this sets out the structure of a company’s shares and how much is left unpaid.
  • Provide any necessary documents with form SH01 – e.g. the ordinary resolution

Common Mistakes to Avoid When Filing a “Return of Allotment of Shares”

When filing your “Return of Allotment of Shares” with Companies House, it is crucial to avoid making any mistakes to ensure compliance. Some of the most common mistakes made when filing a return of allotment of shares include:

  • Missing the deadline for filing: Failing to submit your return within one month of the allocation can lead to financial penalties.
  • Providing inaccurate Information: It is important to ensure that the information you provide about share allotments, such as class, value, or class, is correct. 
  • Not updating share capital: Not updating your company’s share capital after the allotment can lead to confusion and non-compliance.
  • Cutting corners: It is imperative that you follow the correct process to ensure you are legally compliant. This includes gaining the necessary authorisation to allot new shares and keeping the necessary paperwork, such as meeting minutes.
  • Not Seeking Professional Advice: Complex share structures may require professional guidance to ensure accurate filings.

The Role of a Company Formation Agency in the Allotment of Shares

Company formation agencies can assist with the administrative process involved in the Return of Allotment of Shares. This includes submitting form SH01 and preparing board meeting minutes and resolutions.

By engaging a company formation agency, you can ensure that your company remains compliant with the rules on Return of Allotment of Shares filing.

Case Study: Successful “Return of Allotment of Shares” Filing

In a recent example of a successful “Return of Allotment of Shares” Filing, we assisted a UK tech startup with their filing. The tech firm had recently completed a funding round, resulting in the issuing of new shares to investors. We guided our client through the preparation of their SH01 form and the necessary documents.

The filing was promptly submitted to Companies House, meeting the legal deadline. The filing was successfully processed by Companies House with the minimum overhead for our client. Most importantly, they met their filing compliance requirements and reinforced their reputation and investor confidence.

Frequently Asked Questions about “Return of Allotment of Shares”

Who has the power to authorise share allotments?

Usually, directors have the authority to allot new shares if the company has only one share class (e.g. ordinary shares) unless this power is expressly prohibited under the articles of association. To allot new shares in a company with more than one share class, directors must be authorised by a provision in the articles or by a special resolution of the members.

Do I need to include the names of shareholders on the SH01 form? 

There is no need to provide the names of any new shareholders on the Return of Allotment form. Rather, this information should be provided to Company House when you file the company’s next Confirmation Statement (formerly known as an “annual return”). It is considered best practice to file a confirmation statement as soon as you can after an allotment of shares.

Those receiving new shares will not be named on the public register until the confirmation statement has been filed with Companies House. For this reason, we recommend filing a confirmation statement as soon as you can after an allotment of shares.

Uniwide Formations is a leading specialist in UK company registration. By utilising our specialist share services, we can ensure that your allocation of new shares is handled correctly. This includes the submission to Companies House of a Return of the Allotment of new shares (form SH01) and the preparation of a letter of application, meeting minutes, board resolutions and share certificates. 

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