There are times when a company may want to increase its share capital. Increasing share capital is essentially selling newly issued shares to existing or new shareholders in exchange for investment capital. A company may also issue new shares to reward its employees or to give them a stake in the company so that they will be incentivised to work for something which they own.
Please note that the procedure to issue new shares may vary between companies as constitutions between various companies may differ. When in doubt please refer to your own company’s constitution.
The first step to take would be for the directors to seek approval from existing shareholders. Section 161 of the Companies Act states that “notwithstanding anything in a company’s constitution, the directors shall not, without the prior approval of the company in general meeting, exercise any power of the company to issue shares.” This should be done at a general meeting and shareholders will have to agree to this issuance of new shares.
The next step would be for the directors to issue shares. This is referred to as allotment of shares. The company secretary, usually the case, will prepare the Director’s Resolution in Writing. Next, he or she will have to lodge a Return of Allotment form with the Accounting and Corporate Regulatory (ACRA) regarding the allotment of shares within 14 days. The Return of Allotment form will include the following information:
- The number of shares allotted.
- The amount paid or otherwise deem paid and the amount unpaid on each allotment of share.
- The different classes of shares, if any.
- The full name, identification number or passport number, nationality, address, number of shares and class of shares held by each of the company’s members. (If the company has more than 50 shares then the particulars of each of the 50 members who hold the most number of shares in the company after the allotment).
The next step would be to prepare the share certificates to be issued to the new shareholders. The share certificates should be ready to be issued to the new shareholders within two months after the allotment of shares.
After issuing the share certificates, the company secretary will update the company’s register of members.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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