When you operate a company, you have certain reporting obligations to the Australian Securities and Investments Commission (ASIC). ASIC’s role is to manage and publish information about companies in order to ensure transparency and accountability. It is important to know which changes to your company you need to report to ASIC. For example, you will need to notify ASIC of any changes that your company makes which affect its share structure or shareholders. One of these changes is when your company issues shares to new shareholders or its existing shareholders. This article explains when and how to notify ASIC when your company issues shares.

What Does Issuing Shares Mean?

A key source of a company’s money is its share capital. This is the total amount that its shareholders have paid for their shares. A company increases its share capital by issuing shares. 

Issuing shares means that a company is creating new shares, which shareholders then purchase. As a result of issuing shares, the:

  • total number of shares in your company increases because new shares have been created; and
  • percentage ownership of the existing shareholders decreases. 

For example, your company might start with 80 shares, 100% of which you own. An investor might then agree to invest in your company in exchange for 20% ownership of your company. The company issues 20 shares and the investor pays the company to purchase those 20 shares. There are now 100 shares in total in the company, resulting in: 

  • the investor owning 20% of the company; and 
  • you owning the remaining 80% of the company.

If your company is raising money from investors, it will likely issue shares to those investors in exchange for the investors purchasing new shares. 

How Does My Company Issue Shares?

A company issues shares by increasing the number of shares recorded in its ‘register of members’ (also known as a ‘members register’). A members register is a register of who owns the company’s shares. The law requires a company’s members register to contain specific information for each shareholder, including:

  • each shareholder’s name and address;
  • the number and class of shares they own; 
  • any changes to their shareholding (e.g. if they have sold some of their shares); and
  • the date they became a shareholder in the company and stop being a shareholder in the company.

When issuing shares, your company should also follow the correct decision-making process according to the law or your company’s governing documents

For example, a company may have a shareholders agreement which states that:

  • the directors must agree to issue shares by 75% approval; or
  • new shares must be offered to existing shareholders first before they can be offered to third parties. 

Your company should ensure that it is following any such processes before issuing new shares in the company’s members register.

What Do I Need to Tell ASIC When I Issue Shares?

Many people mistakenly believe that a company issues shares simply by updating its details on ASIC. This is incorrect. ASIC is simply a record of what the company has already done, rather than the mechanism by which your company can make those changes. A company actually issues shares by recording the new shareholding in its members register (after following its correct decision-making processes), not by updating ASIC. 

However, once the company issues shares and makes those changes to its members register, it must report that it has done so to ASIC. By issuing shares, the company is actually making two changes it must report to ASIC:

  1. The company has made a ‘change to share structure’. This is because the number of shares in the company has increased, and the company’s total share capital (i.e. the total amount the company has received from shareholders for its shares) has increased.
  2. The company has made a ‘change to members register’. This is because whenever a company issues shares, the details of shareholders in the company’s members register will change. This is either because there are new shareholders in the members register, or the number of shares that existing shareholders own has increased. 

How Do I Tell ASIC That I Have Issued Shares?

Companies notify ASIC of changes by lodging various forms. The form you need to lodge with ASIC to notify them of the ‘change to share structure’ and ‘change to members register’ is form 484. ASIC requires companies to lodge this form online, rather than on paper. Directors can go to ASIC’s online portal, log in using the company’s corporate key and lodge a form 484 setting out the changes.

Some of the information which ASIC will require you to report when your compny issues shares include:

  • the number of new shares issued;
  • the amount paid for each share;
  • whether there are any amounts unpaid on the shares (e.g. the shareholder received shares worth $10 but only paid $5);
  • the date on which the shares were issued; and
  • details of any new shareholders (names and addresses).

When Do I Have to Tell ASIC That I Have Issued Shares?

ASIC requires that you provide notice that your company has issued shares within 28 days of issuing the shares. If you notify ASIC more than 28 days after issuing the shares, late fees will apply.

Key Takeaways

When your company issues shares to new or existing shareholders, your company will need to notify ASIC of those changes. You have an obligation to notify ASIC of any shares you issue within 28 days of issuing them. If you have any questions about how to issue shares or need help with issuing shares in compliance with the law and your company’s governing documents, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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