In most cases, the easiest and most tax efficient way to give shares to a new co-founder or team member is to issue new shares.
The Issue Shares product lets you issue shares to team members at nominal value before a funding round. Note that issuing shares at nominal value may create a tax liability if the shares have a market value, so this is usually only done well before the first funding round. If you've started discussing a company valuation with your investors it's more likely that shares issued at nominal value may attract tax liability.
The Issue Shares product includes everything you need to properly document a share issuance.
Here's the process step-by-step:
Step 1: Head over to the Cap Table > Issue Shares then hit the "New Share Issue" button.
Step 2: An overview of the product will then appear on the right hand side. Once you've read that, please click "continue".
Step 3: Next,
- choose the date of the shares issuance - when do you want those shares to be issued to your co-founder or team members? This is the date that will appear on the SH01 form.
- choose the share class - what share class will you give to your co-founders and team members? This will often be the same as yours to your co-founders but it could also be Ordinary B (Non-Voting) for your team members.
- choose if you want to issue those shares at the nominal value (you'll find the share nominal value of your company on your Cap Table - it is often between £0.00001 and £1) or at the nil value (£0) if the person is being given shares in exchange for his/her services.
Step 4: Add the persons you would like to issue equity to (issuees) by clicking on "Add new" in the Issuees' box. You can add either a new issuee (and enter their details) or search for an existing shareholder.
If you add a new issuee and this new issuee is a company, please see how to add a company investor here.
Step 5: Choose how much equity you want to allot. This can be expressed either as a post-money ownership percentage or as a flat number of shares.
- The post-money ownership percentage will be the shareholding in the company after the new allotment of shares. The platform will automatically calculate the number of shares to be issued to match this percentage.
Great, you've done the most difficult part! Now you just have to create the documents and get them signed:
Step 6: Create the Shareholders Resolution by clicking on the "create" button. It needs to be shared with your existing shareholders to allow the company to issue the new shares (click on the "share" button at the top of the document). It will then generally need to be signed by at least 75% (by number of shares held) of voting shareholders.
Step 7: Set the terms and create the Board Resolution - these Board Minutes will document the meeting where the board approves the issuing of new shares. Let us know who chaired the meeting and if there were any absent directors.
Once you've clicked "done", create the Board Minutes by clicking on the "create" button in the Board Resolution box. You'll have to get this document signed by the director of the company.
Step 8: Create the SH01 form by clicking on the "create" button and get it signed by the company's director.
Step 9: Send the signed SH01 form and the signed Shareholders Resolution to Companies House.
For companies registered in England and Wales:The Registrar of Companies, Companies House,Crown Way, Cardiff, Wales, CF14 3UZ.DX 33050 Cardiff.
Step 10: Issue share certificates to your co-founders or team members by clicking on the "issue share certificates" button.
Now you might want to have a look at this article untitled "how do I issue share certificates".
You're all done, nice!