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8 February 2024

1. Introduction

In this instalment of the KPMG Law ‘Guide To…’ series we will look at the legal basis for share allotments, matters to be considered when allotting shares, and consequences for non-compliance with the relevant provisions of the Companies Act 2014 (the “Act”).

2. Statutory basis

Part 3 (Sections 64 to 90) of the Act outlines the law relating to a company's share capital and share subscriptions.

It should be noted from the outset that a limited liability company (“LTD”) is prohibited from having its shares listed on a public exchange or platform, nor can it offer shares to the public.

3. Allotment versus issue of shares

While reference is often made to allotment and issue of shares as being one and the same process, i.e. the creation of new shares in a company and acquisition of these shares by a shareholder, these two concepts are, in fact, separate.

The allotment of shares refers to the creation of a new share and its designation of ownership to a particular individual or corporate (as the case may be). It is important to note, however, that the allotment of a share does not include such individual or corporate being included in the register of members.

The issue of shares will follow the allotment of shares, and a share is deemed to be issued when its allotment has been registered in the company’s register of members, as discussed in further detail below.

The register of members of the company is prima facie evidence of legal ownership. When shares are issued, the right to become the registered holder of the shares becomes perfected, and per the decision in National Westminster Bank plc v Inland Revenue Commissioners 1, a share is deemed to be issued when its allotment has been registered in the company’s register of members. Accordingly, the company’s register of members should be located and updated upon allotment to ensure the validity of the transaction and compliance with Section 168(2) of the Act.

The beneficial owner of the shares receives the income or dividends from the share ownership, but it is the legal owner who appears in the register of members, on the share certificate and in the company’s official documentation and public records (apart from the RBO as discussed below).

4. Authorised share capital

The authorised share capital amount is the maximum amount of share capital that a company is authorised to issue to its shareholders.

To the extent that the allotting company has an authorised share capital, there must be sufficient authorised but unissued share capital to allow for the subscription shares to be allotted and issued by the company.

5. Authority to allot shares

Before a share can be allotted, a review of the constitution of the allotting company must first be carried out to ensure that the directors have a general authority to allot shares and that any restrictions on allotments are complied with.

Section 69(4)(b) of the Act is an optional provision which states that the directors of a company may allot shares on such terms and at such times as they may consider to be in the best interests of the company and its shareholders. To the extent that the constitution of the allotting company does not provide otherwise, section 69(4)(b) of the Act serves to provide the directors of the allotting company with the power to allot shares.

However, before shares can be allotted, certain statutory conditions will need to be satisfied. Section 69(1) provides that such allotment must be authorised by the constitution or by a resolution of the general meeting. As such, most constitutions will allow for the allotment of shares in order to avoid the requirement to pass an ordinary resolution.

6. Pre-emption rights on allotment

A further consideration before undertaking a share allotment is pre-emption rights. A pre-emption right is a right for existing shareholders to have first refusal on the issue of new shares by a company with a view to protecting against dilution of their shareholdings.

Section 69(6) of the Act provides that statutory pre-emption rights shall apply to the allotment of shares. In addition, in the context of a LTD, contractual pre-emption rights are commonly found in a company’s constitution and a shareholder's agreement between the company’s shareholders.

However, section 69(12) disapplies section 69(6) of the Act and clarifies that the pre-emptive offer does not apply to allotments of shares to the extent that either the constitution, a special resolution, or the terms of issue of already allotted shares provide otherwise. Further, the statutory pre-emption right does not apply to an allotment for a non-cash consideration.

Again, prior to undertaking an allotment (and in particular where the prospective shareholder does not already hold shares in the company), a review of the constitution should be undertaken to ensure there are no pre-emption rights on the allotment.

7. How to allot shares

As an allotment is essentially the sale of shares by a company to a prospective shareholder, and as such the legal principles relating to contract law will apply, i.e. there must be an offer, acceptance and consideration.

Offer and acceptance

  1. Where the directors, whether by way of resolution or authority granted under the constitution of the company (see paragraph 5 above), agree to allot shares, an individual or company can apply to the company to be allotted such shares pursuant to a subscription letter. While it is always advised that any such offer to subscribe for shares is in writing, it should be noted that an oral offer will be valid for the purposes of a share allotment.
  2. Acceptance by the company of a subscription letter will generally be by way of the conduct of the directors. Again, this may be orally or in writing.
  3. The most common form of acceptance is the issuing of a share certificate and writing up of the register of members.

When are shares paid up?

  1. For the purposes of Section 64(3) of the Act, a share in a company shall be taken to have been paid up (as to its nominal value or any premium on it) in cash or allotted for cash if the consideration for the allotment or the payment up is:
    1. cash received by the company; or
    2. a cheque (providing the directors have no reason for suspecting that it will not be paid); or
    3. the release of a liquidated debt owed by the company; or
    4. an undertaking to pay “cash” at a future date (which the directors have no reason for suspecting will not be complied with).
  2. This provision gives statutory effect to the decisions in Re Harmony and Montague Tin and Copper Mining Co Spargo’s case 2 and Larocque v Beauchemin 3 as to the circumstances in which shares are to be taken as having been paid for in cash.

Money or money’s worth

  1. Section 71 of the Act section recognises a well-established principle at common law, namely that a company may allot shares not only for cash but also for a non-cash consideration. This includes goodwill and expertise. In addition, shares in the capital of a company cannot be allotted at a discount to their nominal value.
  2. However, it is worth noting that in contrast to the law relating to public limited companies ("PLCs"), there is no requirement that shares taken by a subscriber to the constitution of an LTD and any premium on the shares must be paid for in cash, or that they are paid up to any extent.

Partly paid shares

When the full nominal value of the shares has not been paid on subscription, they are known as partly paid shares. There may be an agreement to pay the unpaid portion at a specific future date (un-called capital) or on liquidation (reserve capital). Notably, shareholders of partially paid shares have the same shareholders rights as fully paid shareholders.

Call on shares

Under section 77 of the Act, except where the company’s constitution provides otherwise, the directors may from time to time make calls on the members in respect of moneys unpaid on shares. Each member shall pay subject to receiving at least a 30-day notice. Calls can be revoked and postponed and shall be deemed to have been made at the time when the resolution of the directors was passed.

8. Share certificate

A share certificate under the common seal of the company is prima facie evidence of the title of the member to the share. Under section 99 of the Act, a company must within two months after the date of an allotment of shares, complete and have ready for delivery the certificate of all shares allotted or transferred unless the condition for the shares issue otherwise provides.

9. Application of subscription monies

The investor may wish to be specific as to the precise application of the subscription monies by the company. This should be clearly documented in an agreement between relevant parties such as a shareholders’ agreement.

10. Warranties

In certain circumstances, warranties may accompany the allotment of shares. Warrantors may include the company, the existing shareholders and possibly the management team (however it will likely be very difficult to obtain warranties from management unless they are shareholders in the company).

In consideration of, and as an inducement to the investor to subscribe for the subscription shares, the warrantors may wish to jointly and severally represent, warrant, and undertake to the subscriber that, save as disclosed, each of the warranties is at the date of the agreement true and accurate in all respects. However, if the warrantors include individuals other than the company and founder shareholders it may be appropriate to agree a different basis of liability e.g. severally as between the company and other warrantors and jointly and severally as between each of the warrantors.

Also, warrantors may resist joint and several liability in relation to clauses where one warrantor is not in a position to procure compliance by the other warrantors with a particular covenant (i.e. in the case of a restrictive covenant).

11. Registration of allotment

Every allotment of shares by a LTD, or by a company limited by guarantee and having a share capital must be notified to the Companies Registration Office ("CRO") within 30 days of the date of allotment. Details of the allotment must be provided in the prescribed form to the CRO.

Most (but not all) companies with a shared capital will have an authorised share capital amount which is stated in their constitution. If a company must increase its authorised share capital in order to facilitate a proposed subscription, the members must resolve to do so and additional prescribed forms will be required to be provided to the CRO.

Failure to register an allotment of shares within 30 days after the allotment, is a Category 4 offence which attracts a fine of up to €5,000.

12. Beneficial Ownership

Under the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 as amended by S.I. No 308 of 2023 (the “Regulations”), all Irish incorporated companies (unless exempt) are required to create and maintain a register of their beneficial owners (the “Beneficial Ownership Register”). In addition, the Regulations require companies to file information from their Beneficial Ownership Register on a Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (the “CRBO”) maintained by the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies

To the extent an allotment of shares gives rise to an obligation to update the Register of Beneficial Ownership maintained by a company, the required steps should be taken to record the update and arrange for the corresponding update to the CRBO within 14 days. Failure to take steps to update the Register of Beneficial Ownership and the CRBO will result in the company being liable on summary conviction to a Class A fine of up to €5,000 or conviction on indictment to a fine of up to €500,000.

Currently the public cannot access information on the CRBO, the restricted access previously afforded to the public was revoked by amending legislation in June 2023. Access to restricted information is available only to designated persons required to carry due diligence measures in accordance with the Criminal Justice (Money Laundering and Terrorist Financing Act 2010) and to those who can demonstrate they have a legitimate interest in accessing the information. Unrestricted access is available to Competent Authorities.


  1. National Westminster Bank plc v Inland Revenue Commissioners [1995] 1 AC 119.
  2. Re Harmony and Montague Tin and Copper Mining Co (Spargo’s Case) [1873] 8 LR Ch App 407.
  3. Larocque v Beauchemin [1897] AC 358.

Queries? Get in touch

Please contact KPMG Law if you require any advice or assistance in relation to an allotment of shares.

sal nash

Salvador Nash

Head of Company Secretarial