Share allotments and transfers: a practical guide
A share allotment creates new shares in the company and issues them to a person or entity, increasing the total share capital. A share transfer moves existing shares from one holder to another, leaving the total share capital unchanged. The two events are different in substance but use similar paperwork and have similar ASIC obligations.
For an allotment, the directors must pass a resolution authorising the issue of new shares to a specific person at a specific price, and the company must update its register of members. For a transfer, the existing holder and incoming holder execute a share transfer form, the directors approve the transfer (subject to any pre-emption rights or constitutional restrictions), and the register is updated. In both cases, the company should issue or reissue share certificates to reflect the new holdings.
The relevant ASIC notification is Form 484, which must be lodged within 28 days of the change. If shares are issued for non-cash consideration under a written contract, a Form 207Z must also be lodged (public companies also lodge a Form 208 or a copy of the contract). Late lodgement attracts the standard ASIC late fee schedule. Form 484 records the type of change (allotment, transfer, cancellation), the share class affected, the parties involved, and the new total holdings.
The common errors we see, in order of frequency: forgetting to update the share register after the ASIC lodgement (the register is the legal record of ownership, not the ASIC notification), mismatched director consent dates on the issue documentation, missing pre-emptive rights consent where the constitution requires existing shareholders to waive their pre-emption rights, and incorrect total-shareholding totals on the Form 484 itself.
If a historical share allotment or transfer has not been properly documented or lodged, the company should rectify the position rather than ignore it. The general approach is to prepare confirmatory resolutions, update the register and lodge the outstanding Form 484 (late fees will apply). Where the defect affects the validity of an issue or the accuracy of the register, legal advice should be obtained on whether a court order rectifying the register or validating the issue is needed. CoSec Partners handles share-related lodgements as part of standard ongoing compliance under our Outsourced and White Label models.
Frequently asked questions
What is the most common mistake with share allotments?
Updating ASIC but not the register of members. The register is the legal record of ownership; the ASIC notification is a notification. Companies routinely discover during due diligence that the ASIC record and the register disagree, and reconciling them years later is far harder than doing it at the time.
What if a past share issue was never lodged with ASIC?
Rectify rather than ignore. The usual approach is to prepare confirmatory resolutions, update the register and lodge the outstanding Form 484, and late fees will apply. Where the defect affects the validity of an issue or the accuracy of the register, get legal advice on whether a court order rectifying the register or validating the issue is needed. An unrectified register is a much larger problem than the late fee.
Do shareholders have to approve a new share issue?
For most proprietary companies the directors have the power to issue shares, subject to the constitution. In a proprietary company the replaceable rule in s254D, and most constitutions, require new shares to be offered to existing holders of that class first, unless the members approve the issue by resolution or the holders waive the right in writing. Missing this step is a frequent defect.
This article is general information only and does not constitute legal, financial, or tax advice. While we endeavour to keep content accurate and current, laws and regulations change frequently. For advice specific to your circumstances, please consult a qualified professional adviser. CoSec Partners Pty Ltd accepts no liability for actions taken based on this content.