Adding or Removing Shareholders
Understand how to update shareholders, and the difference between issuing and transferring shares.
A shareholder owns part of a company through shares. When ownership changes, shares must be either transferred or newly issued. It’s important to use the correct method to ensure your company records remain accurate and compliant with Companies House.
What is a shareholder?
A shareholder is an individual or organisation that owns shares in a company. A shareholder can also be a director and/or Person with Significant Control (PSC), depending on their level of ownership.
When to Transfer Shares vs. Issue New Shares
Transfer Shares
Transferring shares means moving existing shares from one shareholder to another. The total number of shares in the company stays the same.
When might you transfer shares?
-
Example 1:
A owns 100 shares and wants B to hold 50% of the company. A can transfer 50 of their existing shares to B. -
Example 2:
A and B each hold 50 shares. If B wants to exit the company, B can transfer their 50 shares to another party—either A or a new shareholder (C).
Issue Shares
Issuing shares means creating new shares and allocating them to a shareholder. This increases the total number of shares in the company and can dilute existing ownership.
Issuing is typically used when:
- There aren’t enough existing shares to achieve the desired ownership split, or
- Existing shareholders prefer not to give up (transfer) their shares
When might you issue shares?
-
Example 1:
A owns 1 share and wants B to hold 50% of the company. Since a single share can’t be split, the company can issue 1 new share and allocate it to B. The company then has 2 shares in total, with A and B each holding 50%. -
Example 2:
A owns 100 shares and the company wants to bring in B with a 20% stake without reducing A’s percentage holding. The company can issue 25 new shares, allocating them all to B. This results in 125 shares in total, with A holding 100 (80%) and B holding 25 (20%).
How to Transfer Shares
- Agree the transfer between both parties
- Complete a stock transfer form
- Update the company’s register of members
- Issue updated share certificates
- Report any changes where required
Remember: a transfer does not change the total number of shares in the company—only the ownership.
How to Issue New Shares
- Check the company’s share structure and authority to issue shares
- Pass the appropriate shareholder or board resolution
- Allot new shares to the new shareholder
- Update the register of members
- Issue new share certificates
- File the relevant confirmation with Companies House
Remember: Issuing shares increases the total number of shares in the company and can change ownership percentages for existing shareholders.
Key difference
- Transfer of shares = existing shares change hands
- Issuing shares = new shares are created and allocated
How to remove a shareholder
A shareholder cannot usually be “removed” directly. Instead, their shares must be:
- Transferred to another person, or
- Bought back or cancelled (if permitted under company structure and law)
Once the shares are disposed of, the register of members must be updated accordingly.
Important considerations
- Share changes must always be properly documented
- Ownership percentages may change when new shares are issued
- Companies must keep accurate statutory registers
- It is best practice to file a confirmation statement after completing a share transfer or share issuance to ensure the company’s ownership structure is accurately updated at Companies House.
- Certain share changes may require legal advice (e.g. buying back shares)
Need help?
At 1st Formations, we can help you manage share transfers and share issuances. Our services ensure all documentation is completed accurately and all required filings are made with Companies House, helping you stay compliant with ease.