Rights issue

A rights issue is an issue of shares to existing shareholders in proportion to their existing shareholding.

Rights issues are usually used when the company wishes to raise further capital from its existing shareholders.

A shareholder who is provisionally allocated shares under a rights issue may sell his right to acquire the shares by renouncing their allotment in favour of another person.


Bonus issues

A bonus issue is the issue of shares to existing shareholders in proportion to their existing holdings. It differs from a rights issue in that the shareholder is not obliged to make payment for the shares. Instead the company's capital reserves are used to effect payment, and for this reason a bonus issue is sometimes called a 'capitalisation issue'. Bonus issues are also sometimes called 'scrip issues'.

The effect of a bonus issue is to increase the capitalisation of the company, so that the permanent capital available to it can more realistically reflect the assets employed by the company.

As the number of shares in issue increases, the value of each share is reduced. This can make the shares more marketable. However, as the shares are issued in proportion to existing holdings, the overall value of the shareholding is not affected. For example, if before the bonus issue the shareholder had 100 shares worth £10 each and after the bonus issue he has 200 shares worth £5 each, in both cases the value of the holding is £1,000.


Capitalisation of loans into shares

Shares may also be issued to convert a loan in the balance sheet into permanent capital; ie to effect repayment of the debt owed by the company by the issue of shares.

Other types of share issues

Find out more about other types of share issues.

Our rights issue, bonus issue and capitalisation of loans into shares services include:

• Preparation of all necessary minutes, resolutions and forms in order to effect the share issue;
  
  
• Detailed guidance and procedure note on the process being undertaken
  
  
• The filing of all required forms and reolutions at Companies House.

Please note that our rights and bonus issue services are only appropriate where the issue is being made by a private company or unlisted public company.

Next steps

Our fees in relation these services are as follows:

• Rights issue or bonus issue – fees start at £215 + VAT
  
  
• Capitalisation of loans - fees start at £160 + VAT

For more information please contact our Corporate Legal Services team using the links in the box on the right or:

ORDER NOW - rights issue
ORDER NOW - bonus issue