How do people get shares in a company?
Shares can be acquired either directly from the company itself (share allotment) or from an existing shareholder (share transfer).
Acquisition from the company
When shares are created they are 'allotted' or 'issued' to those people or other companies who become the company's
shareholders.
(The terms 'allot' and 'issue' are often used interchangeably. In some cases, particularly when shares are created by a
public company, there may be a difference. Allotment, strictly, is the allocation of the right to certain shares to particular applicants
for them. Such 'allottees' may be sent allotment letters (which may be renounceable in favour of others), and the actual issue of
the shares occurs later. In most private companies allotment and issue will be the same process.)
Allotments are made by the directors, but there are various statutory rules and procedures which must be complied with, as well as any provisions in the company's articles. (See related topic: Issuing shares)
In private companies the allotment will be a private arrangement between the company and those who invest in it. A public company may make the issue through the Stock Exchange or on the Alternative Investment Market.
Acquisition from an existing shareholder
Subject to such restrictions as appear in the company's memorandum and articles, a shareholder may sell his or her shares to another
person or give them away. A sale or gift will be a transfer of the shares (see related topic: Transferring
shares).
If a shareholder dies, there is said to be a 'transmission' of the shares (see related topic: What happens if a shareholder dies?)
Company Law Solutions provides an expert service for all your company law requirements, including advice about share allotments and transfers.
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