What Is Issue of Shares? A Simple Guide for UK Businesses

Running a company in the UK is not just about selling products or services. To grow, companies often need extra funds, and one common way to raise money is through the issue of shares. But what does this mean? Why do companies issue shares? And how does this connect to other business matters like quarterly payments corporation tax or even keeping a Santander dormant account?

In this guide, we will break it down in simple words so that anyone can understand.

What Does “Issue of Shares” Mean?

When a company starts, it is divided into parts called shares. Each share represents a piece of ownership in the company.

For example:

• If a company has 100 shares and you own 50, you own half of the business.

The issue of shares means creating and giving out new shares to people. These can be:

• Investors who want to put money into the company.

• Current shareholders who want to increase their ownership.

• Employees, as part of a bonus or reward scheme.

Issuing shares is one of the safest ways for companies to raise funds without taking loans.

Why Do Companies Issue Shares?

Companies issue shares for many reasons, such as:

1. Raising Funds for Growth – Money raised can be used to expand the business, buy new equipment, or hire staff.

2. Bringing in New Investors – More shareholders mean more support for the business.

3. Reducing Debt – Instead of borrowing, issuing shares brings in money without repayments.

4. Rewarding Staff – Some companies issue shares to employees as part of their salary package.

This helps companies grow faster while spreading ownership.

Types of Shares in the UK

Not all shares are the same. Companies can issue different types:

• Ordinary Shares – Give owners voting rights and a share of profits.

• Preference Shares – Provide fixed dividends before ordinary shares.

• Non-Voting Shares – Share profits but do not allow voting rights.

Each type has its own benefits, depending on what the company and investors want.

The Process of Issuing Shares

Issuing shares is a legal process and must be done carefully. The steps usually include:

1. Approval by Directors – The board of directors must agree to issue new shares.

2. Update Company Records – The company’s statutory books must record the new shares.

3. Inform Companies House – The company must file the correct forms to update the official register.

4. Give Share Certificates – New shareholders receive certificates proving their ownership.

If any of these steps are missed, the issue of shares may not be valid.

Issue of Shares and Corporation Tax

Now, you may ask: what does issuing shares have to do with quarterly payments corporation tax?

Here’s the link:

• When companies issue shares, they often raise more money.

• With this money, they can expand and increase profits.

• Higher profits mean more corporation tax.

Some very large companies must pay this tax in instalments, called quarterly payments corporation tax. So while issuing shares itself is not taxed, it can lead to higher tax responsibilities later on.

Everyday Connection: Santander Dormant Account

At first, issuing shares and something like a Santander dormant account may seem unrelated. But both highlight the importance of proper financial management.

• A dormant account is a bank account that has not been used for a long time. Companies sometimes keep accounts dormant if they are not active but want to preserve funds.

• Issuing shares, on the other hand, is an active step to raise money for growth.

Both examples show how businesses must carefully manage funds—whether holding them safely in a dormant account or raising new money through shares.

Benefits of Issuing Shares

Here are the main advantages:

• No loan repayments are required.

• Helps bring in new investors and partners.

• Gives employees ownership and motivation.

• Provides long-term growth funds.

Risks of Issuing Shares

While useful, issuing shares also comes with risks:

• Loss of Control – More shareholders mean less power for the original owner.

• Sharing Profits – Dividends must be shared among more people.

• Legal Duties – Companies must handle paperwork correctly with Companies House.

Example of How It Works

Imagine a company issues 1,000 new shares at £10 each. This brings in £10,000. With this money, the company buys new equipment, increases production, and earns higher profits.

Later, the company may need to pay more tax and even make quarterly payments of corporation tax if it grows big enough. This example shows how issuing shares can help growth but also increases responsibilities.

Final Thoughts

The issue of shares is one of the most effective ways for UK companies to raise money and grow. It helps bring in funds, new investors, and staff motivation. But it also comes with responsibilities, such as updating records and paying higher taxes when profits increase.

Just like keeping a Santander dormant account safe requires care, issuing shares demands proper planning and legal compliance. And as profits grow, businesses must also be ready for duties like quarterly payments corporation tax.

By understanding the process, benefits, and risks, business owners can make smart choices and use shares wisely to build a stronger future.