Accountant For A Limited Company

What is share allotment?

Share allotment is the process of creating and issuing new shares in a UK limited company, increasing total share capital and potentially diluting existing shareholders' ownership. The legal procedure requires board approval, observance of pre-emption rights (unless disapplied), Form SH01 filing within one month of allotment, and updating the register of members and share certificates.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 15 Apr 2026 3

Key takeaways

Allotment creates new shares and increases issued share capital; it differs from transfer, which moves existing shares.
Form SH01 must be filed with Companies House within one month of allotting shares.
Existing shareholders have pre-emption rights under Companies Act 2006 s.561 unless the company's articles or a special resolution disapply them.
No stamp duty applies to allotment; duty is payable only on subsequent transfers of those shares.
Allotment can dilute existing shareholders' percentage ownership unless they subscribe for the new shares proportionately.

If you’re a UK business owner, you’re likely familiar with the concept of share allotment. Share allotment is an important part of any business’s financial structure, and understanding it can help you make better decisions about your company’s future. Here’s what you need to know about share allotment and how it can help you.

Share allotment is a process by which a company divides its shares into smaller units. This allows the company to offer more shares to investors, which can help the company raise capital. The company can also use share allotment to give current shareholders the option to purchase additional shares.

Share allotment is an important part of any company’s financial structure, as it can help the company raise capital and increase its value. Share allotment can also help the company attract new investors and give current shareholders the opportunity to increase their stake in the company.

When a company decides to allot shares, it must first determine the number of shares to be allotted. This number is typically based on the company’s current financial situation and its goals for the future. Once the number of shares has been determined, the company must then decide how much each share will be worth.

This is usually based on the company’s current stock price and its future prospects. Once the number of shares and their value have been determined, the company must then decide who will receive the shares. This is usually done through a process called “allotment”, in which the company offers the shares to certain shareholders or investors.

The company can also choose to offer the shares to the public, which can help the company raise capital and increase its value.

Share allotment can be beneficial to both the company and its shareholders. For the company, share allotment can help it raise capital and increase its value. It can also help the company attract new investors and give current shareholders the opportunity to increase their stake in the company.

For shareholders, share allotment can be a great way to increase their stake in the company. It can also help them diversify their investments and reduce their risk. Additionally, shareholders may be able to benefit from the company’s future success if the company’s value increases.

While share allotment can be beneficial to both the company and its shareholders, there are also some risks associated with it.

For example, if the company’s value decreases, shareholders may lose money. Additionally, if the company’s stock price falls below the price of the allotted shares, shareholders may be unable to sell the shares at a profit. It’s also important to remember that share allotment can dilute the value of existing shares.

This means that if the company issues more shares, the value of existing shares may decrease. This can be a problem for current shareholders, as they may not be able to sell their shares at a profit.

Conclusion

Share allotment is an important part of any company’s financial structure, and understanding it can help you make better decisions about your company’s future. Share allotment can help the company raise capital and increase its value, and it can also help shareholders increase their stake in the company.

However, it’s important to remember that there are some risks associated with share allotment, and these should be taken into consideration before making any decisions.

Frequently asked questions

What is the difference between share allotment and share transfer?

Allotment creates new shares, increasing total share capital. Transfer moves existing shares between shareholders without changing the number of shares. Allotment requires Form SH01; transfers use Form J30. Allotment is free of stamp duty; transfers incur duty over £1,000.

Do I need Companies House approval before allotting shares?

No. You do not need pre-approval. You must file Form SH01 within one month of allotment with details of the shares issued, consideration, and allottees. Late filing incurs penalties.

What are pre-emption rights and how do they affect allotment?

Pre-emption rights (Companies Act 2006 s.561) give existing shareholders the right to be offered new shares before they are offered to third parties. Most articles impose pre-emption rights unless the company was formed with modified articles. You can disapply them by special resolution if you plan to allot to new investors.

Do I pay stamp duty on share allotment?

No. Stamp duty applies to transfers of shares, not to allotment. When new shares are later transferred, the buyer pays stamp duty at 0.5% on transfers over £1,000. Allotment itself is duty-free.

What happens to existing shareholders' ownership when new shares are allotted?

Their percentage ownership is diluted unless they subscribe for new shares proportionately. For example, if you allot 50 new shares to a new investor and existing shareholders do not subscribe, their ownership percentage decreases. This can have tax implications for diluted shareholders.

What tax does the allottee (new shareholder) face?

If shares are allotted at fair market value, there is typically no income tax on the allottee. If shares are allotted at below market value, the allottee may face income tax on the discount as an employment benefit. Professional valuation is recommended for arm's-length transactions.

Can the company allot shares to employees?

Yes. Employee share schemes are common and may qualify for tax relief under HMRC rules (e.g. EMI options). The allotment itself follows the same rules; pre-emption and board approval still apply unless removed by resolution.

How long does the allotment process take?

Typically 2-4 weeks, including board resolutions, documentation, share certificates, and Companies House filing. If pre-emption rights require offering shares to existing shareholders, allow additional time for their response.

Key takeaways

Overview of Share Allotments: