The shareholding structure is usually dictated by the amount of money that party is investing in the company. For example if one party is investing 50% of the starting capital, they would usually be allocated 50% of the available shares in return for their investment.
Allocating shares at incorporation
There isn’t a correct amount of shares you should allocate to a shareholder, as this depends on circumstance. If you have more than one shareholder, keep in mind whether to give an equal or an unequal allocation of shares.
To issue shares in a company is to create new shares, and:
- All existing members are to agree to the issue of shares via a board meeting.
- You are to complete a return of allotment of shares via an SH01 form.
- Create board resolution, meeting minutes, and issue the share certificate(s) to the new shareholder.
So how many should I issue? A common practice is to issue share capital which is easily divisible in the future (for example it may be best to issue 50 or 100 shares upon incorporation). By doing so this will allow you to more comfortably split / change the ownership of shares going forward.
To allot new shares, existing members will need to waive pre-emption rights on the allotment of shares. The prospective members should deliver a letter of application to the company, and the board of directors (or members, if required by the articles) must approve the allotment and record it in the register of members.
Historically, Companies in India have had on the average at least 30 % to 50 % shareholding in their companies to ensure management control.
Process of transfer of shares from one Demat account to another
- Step 1 – The investor fills the DIS (Delivery Instruction Slip) and submits it to the current broker.
- Step 2 – The broker forwards the DIS form or request to the depository.
- Step 3 – The Depository will transfer your existing shares to the Demat account.
And when it comes to the question of how to change shareholders at Companies House, in order to issue new shares, you have to fill out Companies House Form SH01 “Return of allotment”; subsequently this must be submitted to Companies House within one month of the allotment.
Register by post
You can send your changes by post. Download and fill in the share change forms depending on the changes you’re making. Send your completed forms, a copy of your resolution if needed and your statement of capital to the address on the forms.