As a company owner, you can choose to issue a corporate share through either a share issue or a share transfer.
What are they? Let’s go through it.
A share issue involves dividing the company’s ownership into shares and distributing them to new investors, employees or existing shareholders. Whether you own a public or a private company, you can issue any number of shares, provided you issue a share certificate to each new shareholder.
You would also need to keep a register containing the details of each shareholder in your company.
On the other hand, a share transfer is similar to a share issue but moves existing shares from one shareholder to another.
Here is an example:
There are two shareholders in ABC Pty Ltd (not a real company), Sally and Amy. Each owns 100 shares in the company. The total share capital is 200, and each owns 50% of the company.
The example below will show you what will happen if a new shareholder joins the company through a share transfer and share issue:
1. Share Issue
- Share Sale and Purchase – A new shareholder (Kim) purchases 100 new shares at $10 per share
- Outcome – Sally, Amy and Kim will each have 100 shares with a total of 300 shares in the company. This means they have 33.33% in ABC Pty Ltd.
- Value – ABC Pty Ltd receives $1,000 from Kim
2. Share Transfer
- Share Sale and Purchase – Sally sells 20 of her shares to Kim for $10 per share
- Outcome – There are three shareholders
- Amy – 100 shares and 50% of the company
- Sally – 80 shares and 40% of the company
- Kim – 20 shares and 10% of the company
- Value – Sally receives $200 from Kim for her 20 shares