UK founders' guide to share capital: the two records that must match

UK Share Capital Changes: A Founder's Guide to Filing Requirements

For a founder leading a growing UK startup, understanding how to report share capital changes to Companies House is not just an administrative task; it is a legal requirement. After a funding round or when granting equity to a key hire, the follow-up filings are essential for compliance, avoiding director penalties, and ensuring your company is ready for future investment. Missteps can create ownership discrepancies that derail due diligence, a risk no early-stage company can afford. See the Reporting Obligations hub for a complete list of filings and deadlines.

The Two Records That Must Match: Your Core Principle

At the heart of share capital management are two distinct records that must be kept in perfect alignment. First is your internal record, which includes the company’s statutory register of members and your working cap table, often managed in a spreadsheet or on a platform. This is your company's private source of truth. Second is the external record: the public information held at Companies House.

The challenge, and where most errors occur, is that the legal requirements for updating these two records have different triggers and deadlines. Event-driven changes like issuing new shares require immediate filings, while other changes are reported annually. This difference creates the potential for your internal and external records to fall out of sync, causing significant problems later on.

How to Report a New Share Allotment (Form SH01)

Issuing new shares, known as an allotment, is the most common reason for statutory share capital changes. This typically happens during a funding round, when bringing on a co-founder, or granting equity to advisors. The process starts with an internal decision, usually a board resolution, which acts as the legal trigger for the allotment. Once shares are allotted, you must follow a clear, two-step reporting process.

1. Update Your Internal Records (Within 14 Days): According to the Companies Act 2006, a company's internal register of members must be updated within 14 days of a share allotment. This is a strict, non-negotiable internal deadline. Failure to comply is an offence committed by the company and every officer in default.
2. Notify Companies House (Within One Month): You must file Form SH01 (Return of allotment of shares) with Companies House within one month of the share allotment. This form includes a crucial section called the Statement of Capital, which is a complete snapshot of the company's share structure *after* the change.

For example, consider a SaaS startup before its seed round:

Statement of Capital (Before)

• Class of shares: Ordinary
• Number of shares: 1,000,000
• Aggregate nominal value: £1,000

After issuing 250,000 new shares to investors, the new Statement of Capital on the SH01 would look like this:

Statement of Capital (After)

• Class of shares: Ordinary
• Number of shares: 1,250,000
• Aggregate nominal value: £1,250

Missing the one-month SH01 deadline is a common error that can lead to rejected filings and stall the post-funding administrative process.

Handling Share Transfer Notifications in the UK

When existing shares move between two parties, such as an early angel investor selling their stake, the reporting process is fundamentally different from an allotment. A transfer of existing shares does not require an immediate event-driven form to be filed with Companies House. Instead, the change is recorded internally first and reported publicly on an annual basis.

The process begins with a Stock Transfer Form signed by both the seller and buyer. Once the board approves the transfer, the company must update its internal register of members. For most startups from pre-seed to Series B, this internal update is the most critical step for maintaining accurate ownership records.

There is also an important tax obligation. According to HMRC, for share transfers with consideration over £1,000, the buyer must pay 0.5% stamp duty. "Stamp duty on a share transfer must be paid within 30 days of the transfer." The company cannot legally update its register of members until the stamp duty has been paid and the form is officially stamped by HMRC. Public notification of the change in shareholders is then made on the company's next annual Confirmation Statement (CS01). You must also keep your PSC register updated with any relevant changes.

Reporting Share Buybacks in the UK (Form SH03)

A company may choose to buy back its own shares, a common scenario when a departing employee holds vested shares. This process is complex and subject to strict legal requirements for share changes. Unlike a simple transfer, a buyback reduces the company's total issued share capital and requires a specific filing.

The procedure is highly regulated. As stated in the governing legislation, "Share buyback procedures are strictly governed by the Companies Act 2006." A key rule concerns how the purchase is funded: "Funds for a share buyback must come from distributable profits or the proceeds of a fresh issue of shares." Using company capital incorrectly can invalidate the entire transaction. See FRS 102 for the accounting treatment of buybacks.

You must file "Form SH03 (Return of purchase of own shares) with Companies House within 28 days of the purchase." For reporting share buybacks in the UK, this form is mandatory. A stamp duty obligation also applies. According to HMRC guidance, "For share buybacks with a purchase price over £1,000, the company must pay 0.5% stamp duty."

The Confirmation Statement (CS01): An Annual Reconciliation Tool

The Confirmation Statement (CS01) is not for reporting changes as they happen. Its purpose is to serve as an annual reconciliation tool, a snapshot confirming that all information held by Companies House is accurate on a specific date. This is where you officially update the public list of shareholders to reflect any transfers that occurred during the year.

The Statement of Capital on the Confirmation Statement (CS01) should perfectly match the state of your company after the last event-driven filing (like an SH01 or SH03). A common mistake is for a company to issue new shares, forget to file an SH01, and then try to correct the share capital on its next CS01. This will be rejected. The CS01 only *confirms* a record that should have already been updated by the correct event-driven form.

A Founder's Checklist for Companies House Share Filings

For founders managing company administration, navigating Companies House share filings requires a methodical approach. The key is to distinguish between the three primary events and their corresponding obligations.

• New Shares Issued: An event-driven change. You must file Form SH01 within one month to update the total share capital.
• Existing Shares Transferred: Not an event-driven filing. Update the shareholder list on the next CS01. Ensure the buyer pays stamp duty to HMRC within 30 days.
• Shares Bought Back: An event-driven change. You must file Form SH03 within 28 days to report the reduction in share capital and pay any applicable stamp duty.

Across all scenarios, the internal register of members must be treated as the ultimate source of truth. Every external filing should be a direct reflection of a change already recorded internally. Whenever the board approves a share transaction, immediately set calendar reminders for all associated internal and external deadlines. This simple discipline prevents filings from becoming a last-minute scramble and ensures your company’s legal and financial records remain accurate and aligned. Continue at the Reporting Obligations hub for related guides.

Frequently Asked Questions

Q: What happens if I miss the SH01 filing deadline?

A: Failing to file Form SH01 within one month is an offence. Companies House may reject the late filing, and the company and its directors could face penalties. It can also cause delays and complications in future funding rounds, as investors will see the discrepancy during due diligence.

Q: Is a cap table the same as the statutory register of members?

A: No, though they should be consistent. The register of members is the official legal record of shareholders required by the Companies Act 2006. A cap table is a working document, often a spreadsheet, that details the full equity structure, including options and convertible instruments, which are not on the register.

Q: Do I need to notify Companies House when granting employee share options?

A: No. Granting share options does not create new shares, so there is no immediate change to the company's issued share capital. You only need to report a change when the employee exercises their options, which triggers an allotment of new shares and requires you to file a Form SH01.

Q: How do I correct a mistake on a previous Statement of Capital?

A: To correct a historic error on the public record, you typically need to file Form RP04, which allows for a second filing of a previously filed document. For example, you would submit a corrected SH01 attached to an RP04 to replace the original incorrect filing and rectify the public record.