This article discusses what’s involved in share issuing for your company as well as when & how to inform ASIC about these changes.
When you run a business, you are required to record certain information with the Australian Securities and Investments Commission (ASIC). ASIC’s role is to maintain and disseminate information on businesses in order to promote accountability and transparency. It is critical to understand which changes to your business must be reported to ASIC. For instance, you must inform ASIC of any changes to your company’s share structure or shareholders. Offering new shares, or transferring existing shares is an example of these changes. This article discusses when and how to inform ASIC about a company’s share issue.
What is the purpose of issuing shares?
The share capital of a business is a significant source of funding. This is the total sum paid by the company’s stockholders for their shares. A company’s share capital is increased by the issuance of shares.
The act of issuing shares entails the creation of new shares, which shareholders subsequently acquire. The following occurs as a result:
The overall number of shares in your firm rises as new shares are generated, but current shareholders’ percentage ownership drops.
For instance, your business may begin with 80 shares, of which you own 100%. An investor may then agree to invest in your business in exchange for a 20% stake. The corporation issues twenty shares, which the investor pays for. The corporation now has a total of 100 shares, resulting in:
The investor owning 20% of the firm, while you own the remaining 80%.
If your business is obtaining capital from investors, it is probable that it may issue shares to those investors in exchange for their purchase of further shares.
How does your business issue shares?
A corporation issues shares by raising the number of shares listed in its register of members (or member’s register). A member’s register is a record of who owns shares in a business. The legislation mandates that the members register of a corporation have particular information about each shareholder, including the following:
- Each shareholder’s name and address
- the number and class of shares they possess
- any changes to their ownership (e.g., if they sold part of their shares) and
- the dates on which they became (and ceased to be) a shareholder in the firm
Additionally, while issuing shares, your firm should follow the proper decision-making procedure as prescribed by law or your company’s governing laws.
For instance, a company’s shareholders’ agreement may contain the following:
- the directors must agree to issue shares with a minimum of 75% shareholder approval, otherwise, new shares must first be offered to current shareholders before being sold to third parties
Your firm should ensure that any such procedures are followed prior to issuing additional shares in the member’s register.
What information do you need to provide to ASIC when you issue shares?
Many individuals assume that a corporation may issue shares simply by amending its ASIC registration data. This is not accurate. ASIC is only a record of what your business has previously done, not the vehicle via which your business may make those changes. A firm issues shares by entering the new shareholding in its members register (after adhering to the company’s proper decision-making processes), not by updating ASIC.
However, once the corporation issues shares and modifies its members register, it must notify ASIC. By issuing shares, the corporation makes two significant changes that must be reported to ASIC:
- The corporation has altered its share structure. This is because the company’s share capital (i.e. the total amount paid by shareholders for their shares) has grown.
- The firm has made a modification to the membership registration. This is because anytime a corporation issues shares, the information about its shareholders in the members register changes. This is due to the addition of new shareholders to the members register or the rise in the number of shares owned by current shareholders.
How do you notify ASIC of a share issue?
Businesses inform ASIC of changes using a variety of forms. Form 484 is the form that must be filed (online) with ASIC to advise them of the ‘change in share structure’ and ‘change in members register’. ASIC requires businesses to submit this form electronically rather than on paper. Directors can go in to ASIC’s online portal using the company’s corporate key and submit a form 484 detailing the modifications.
ASIC will require you to provide the following information when your company issues shares:
- the number of new shares distributed
- the price paid for each share
- any outstanding balances on the shares (e.g., the shareholder got shares worth $10 but only paid $5 for them)
- the date the shares were issued; and the names
- addresses of any new owners (names and addresses)
When are you required to inform ASIC that you have issued shares?
ASIC requires that you notify them within 28 days of issuing the shares for your company. Late costs will apply if you inform ASIC more than 28 days after issuing the shares.
When your business issues shares to new or existing shareholders, you must inform ASIC. If you have any queries regarding how to issue shares or require assistance in complying with the law and your company’s governing documents, don’t hesitate to contact Fullstack Advisory.