SEIS and EIS compliance and allotting and issuing shares
July 28, 2017 at 9:02 am #2691Jonathan LeaKeymaster
I received the following two questions from someone raising money for their startup:
1) Is ‘allotting’ basically determining who will get a number of shares versus ‘issuing’ which is actually giving out share certificates and registering with companies house?
2) If the above is correct then it is OK to ‘Allot’ shares prior to payment but not to ‘issue’ share certificates or register holdings until after payment….?
My answer was as follows:
Pretty much. The terms ‘allotment’ and ‘issue’ are often used interchangeably in relation to new shares in the capital of a company, however, the terms do have distinct legal meanings.
Shares in a company are allotted when a person acquires the unconditional right to be included in the register of members in respect of those shares. The subsequent issue of those shares is when the name of the person to whom the shares have been allotted is entered on the register of members of the company in respect of them. Allotment creates a right for a person to be registered as a member of a company, but only once a share has been issued can that person exercise his rights as a member.
As far as you need to be concerned, your executed subscription agreements (and payment of subscription monies) are a contractual commitment to issue the relevant number of shares stated when the investment round closes (and you know who is going to make up the round, i.e. what total number of shares need to be issued and to who on the completion date) – at such completion date is when you issue the shares, i.e. execute and date the board minutes, shareholder resolutions, statement of capital forms and share certificates (and update your register of members accordingly). You can’t issue shares prior to payment for them.
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