I am completing a small companies first years accounts. The client formed the company themselves online and they have issued 2,000 - £ 1 shares (£ 2,000) in error as they thought they had issued 2,000 1p (£ 20) shares.
I have never had to change the issued shares before but the client has asked me to change the issued shares to be the £ 20 option.
Is this just a matter of changing the first annual return or will i need to fill in some Companies House paperwork too.
It's a one man Ltd Co. so it's really only an admin issue and also the fact that the client does not want to overdraw their Directors Loan Account too.
Unfortunately, it's not just a matter of amending the annual return. If the company has called up share capital of 2,000 shares of £1 each, then you'd need to do two things to move to 2,000 shares of 1p each:
(1) you can subdivide the £1 shares and convert them into 1p shares. The company would need to pass an ordinary resolution and then file form SH02 at Companies House. If you do this step first, this would lead to the company having share capital of 20,000 shares of 1p each.
(2) the company can reduce it's share capital. The company would have to pass a special resolution whilst the director(s) would need to sign a solvency statement and a statement of compliance. All of these documents, plus a statement of capital, would need to filed at Companies House.
You can do these two steps in any order, so you could reduce the share capital first and then subdivide the remaining shares. You should first check that the Articles of Association of the company allow (or rather, don't restrict) the company's ability to do these procedures.
It's a lot of work for a simple mistake by your client so, once you tell them what would need to be done, they may be happy to leave things as they are.
There's more information about the above procedures on the Companies House website.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
I will read through the Companies House forms and complete this for the client and then on the next annual return I will amend the shares Issued to £ 20 too so that everything ties up.
Not sure what to charge but I think I need to as it seems like a fair amount of work, especially as it's the clients error.
Yes, there will be 200,000 shares. Note to self: must use calculator.....
