Issuing new company shares: model ownership before signing
An investor offers cash for “20% of the company”. Before agreeing, make a table showing the shares before and after the proposed issue. Twenty per cent of the existing share count is not the same as twenty per cent after new shares are created. A short calculation can prevent a significant misunderstanding.
Worked example: a 20% holding after investment
Assume 10,000 existing ordinary shares: founder A owns 6,000 and founder B owns 4,000. Ignore options, convertibles and other classes for this illustration. To give a new investor 20% after a new issue, solve x ÷ (10,000 + x) = 20%. The answer is 2,500 new shares.
| Holder | Before | After 2,500 new shares |
|---|---|---|
| Founder A | 6,000 / 60% | 6,000 / 48% |
| Founder B | 4,000 / 40% | 4,000 / 32% |
| Investor | 0 / 0% | 2,500 / 20% |
| Total | 10,000 / 100% | 12,500 / 100% |
Issuing only 2,000 shares would instead give the investor 2,000 ÷ 12,000, or about 16.67%. Show the final denominator in the investment discussion. These percentages describe share counts under the assumptions; voting, board and other rights still need a separate review.
Worked example: proportional rights shares
Using the same starting holdings, suppose a 1-for-4 proportional offer adds 2,500 shares and both founders subscribe fully. Founder A takes 1,500 and founder B takes 1,000. Their final holdings are 7,500 and 5,000, so the proportions remain 60% and 40%. If one declines, recalculate the eventual allocation rather than promising the same result.
Section 83 distinguishes proportional member offers from other issue routes. Its private-company route depends on the articles, special resolution and notified conditions. Have the chosen route and current requirements checked before circulating an offer or accepting money on unconditional terms.
Separate the cash price from nominal capital
If the 2,500 investor shares have nominal value Rs 10 and an issue price of Rs 100, the proposed receipt is Rs 250,000: Rs 25,000 nominal capital plus Rs 225,000 premium. Compare the Rs 25,000 addition with available nominal headroom. Use the capital reconciliation guide and, if needed, the ceiling-increase checklist.
Prepare an issue pack with a clear sequence
| Stage | Evidence to prepare |
|---|---|
| Opening position | Member register, share classes, options or convertible commitments and current capital clause |
| Commercial terms | Recipient, quantity, price, rights, cash or non-cash consideration and conditions |
| Corporate route | Articles review, approvals, offer documents and any required regulatory permission |
| Subscriptions | Acceptances, declines, receipt evidence and treatment of incomplete subscriptions |
| Allotment | Final allocation, decision record and reconciled before/after ownership table |
| Reporting and records | Current Form 3 return, member and share records, accounts and outcome receipts |
SECP publishes Form 3 for allotments and changes in shareholding, membership or voting rights. Download or use the current filing version and have the due date calculated from the actual relevant event. A subscription receipt, an allotment decision and a submitted return are different pieces of evidence; keep all applicable steps visible.
Questions to settle before signatures
- Is the investor acquiring newly issued shares or buying a founder's existing holding?
- Does the promised percentage use only issued shares or also potential options and conversions?
- What happens if subscriptions are incomplete or a condition is not met?
- Who checks the final allocation against the approval and payment records?
- Which documents will the company and investor receive after completion?
Use the transfer guide if the cash goes to a selling shareholder. Mixed transactions should show the purchase and subscription separately. For non-cash consideration, multiple classes, employee arrangements or a public company, request a tailored issue review before relying on the simple examples here.
A good initial brief includes the present share count, proposed cash amount, desired ownership and any promised board seat. Ask for an explanation of the route and a document list before committing to a filing-only service that may omit the underlying corporate decisions.
I need a share-issue and dilution review before agreeing investment terms. Start with a short summary. Ask for the work scope, required documents and fee before proceeding. Do not send passwords, identity scans or bank statements in the first enquiry.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
- Companies Act 2017 — Pakistan Code consolidation updated 7 October 2022
- SECP Form 3 — allotments and changes in shareholding, membership or voting rights (legacy URL; use current version)
- SECP Companies Regulations 2024 — consolidated through 25 July 2025; reviewed PDF April 2026
Questions people also ask
Do proportional rights shares always dilute me?
In the example both holders subscribe proportionately and their percentages stay unchanged. A different final allocation can change that result.
Is 20% of current shares enough for 20% after the issue?
No. With 10,000 existing shares, 2,500 new shares are needed for 20% after issue under the stated assumptions.
Can a special resolution waive every requirement?
No. Check the applicable issue route, articles, notified conditions and required approvals or filings.
Does premium use up authorized capital?
Compare nominal capital with the ceiling. Keep premium separately identified and have its accounting and permitted treatment checked.
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