Does a company have to issue share certificates to its subscribers?

A company must, within two months after the allotments of any of its shares, complete and have ready for delivery the certificates of the shares allotted as set out in the Companies Act 2006.

Nevertheless, no allotment of shares is made to the subscribers of a company. The subscribers who are named in the statement of capital on formation are deemed to have become members of the company. This means that on registration the subscribers become members of the company.

Consequently as no allotment takes place the company is not required to issue certificates to subscribers. There is no statutory requirement for production of a share certificate and, in any event, a certificate is only prima facie evidence of title to shares CA . This leads to the question whether an indemnity should be provided on the transfer of those shares.

We thoroughly recommend that before a company (or individual) transfers any shares legal advice is sought. In addition, in order to limit and/or avoid any potential litigation between shareholders a shareholders agreement should be considered.

If you are thinking of allotting or transferring shares, please contact Michael Cantwell, one of our corporate specialists on 01132 258811 or by email at michaelcantwell@chadlaw.co.uk

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