Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Ready to take your business to the next level with outside investment or by bringing in new co-owners? One of the most common ways Australian companies raise capital and expand is by issuing shares to new or existing investors - a process that typically begins with a share application. Whether you’re a startup founder seeking seed funds, a growing company offering shares to employees, or an established business looking to restructure, understanding how share applications work is essential for compliance, transparency, and long-term success.
But like most areas of corporate law, the process has its legal risks and paperwork. Many business owners feel uncertain about the proper steps to follow - or what can go wrong if share applications are handled incorrectly. That’s where the right approach (and the right support) can make all the difference.
In this guide, we’ll break down everything you need to know about share applications: what they are, why they matter, and how to navigate the legal requirements in Australia so you can focus on building the business you envision. If you want to issue shares with clarity and confidence, keep reading - we’re here to help you do it the right way from day one.
What Is a Share Application?
Let’s start with the basics. A share application is a formal request or offer by an individual or entity to become a shareholder in a company by acquiring its shares. This typically involves filling out and submitting a share application form to the company, specifying how many shares the applicant wishes to buy, and agreeing to the relevant terms and payment obligations.
Businesses use share applications in several common situations:
- Raising capital from new investors (e.g., startup fundraising rounds)
- Offering employee share schemes or incentives
- Allowing existing shareholders to purchase additional shares (e.g., rights issues)
- Restructuring ownership between founders or partners
In Australia, the process is regulated, especially for companies registered with the Australian Securities and Investments Commission (ASIC). Getting it right is key to ensuring your share issuance is legally valid and avoids disputes down the track.
Why Are Share Applications Important for Your Business?
Share applications do more than just help you bring new money or partners into your business. They play a big role in legal compliance and risk management. Here’s why:
- Clarity and Documentation: The application form clearly records who applied, for how many shares, at what price, and on what date. This helps prevent misunderstandings later.
- Legal Compliance: Australian corporate law requires careful documentation and proper shareholder registration. The share application marks the start of the formal issuance process.
- Managing Capital and Control: You control how many shares are issued and to whom, so you don’t accidentally dilute your current ownership too much or breach any pre-existing agreements (like a shareholders agreement).
- Protecting All Parties: The document provides a record for both the company and the applicant, which can be referenced if any dispute or confusion arises.
In short, a share application is the official starting point for expanding your company’s ownership, and the foundation for a legally sound share issuance process.
How Does the Share Application Process Work?
If you’re new to this area, here’s a straightforward look at the usual step-by-step process when issuing shares in your company:
1. Board or Company Approval
Before accepting applications, your company must decide (via a directors’ or shareholders’ resolution) to issue the shares, how many will be offered, and at what price. This step is crucial for ensuring compliance with your company’s constitution and the Corporations Act 2001 (Cth).
Not sure how a board resolution works? Read more in our guide to sole director resolutions.
2. Prepare the Share Application Form
The company provides interested investors with a share application form. This form usually includes:
- The name and contact details of the applicant
- The number and class of shares applied for
- The application price or terms
- Payment instructions
- A statement agreeing to be bound by the company’s constitution or relevant terms
- Signature and date
If you are making a public offer of shares, more stringent disclosure requirements apply-usually involving a prospectus. For most early-stage or private companies, applications are handled by private form.
3. Receive Applications and Payment
Applicants complete and submit their forms (physical or digital), along with payment for the shares. The company should keep these records safe, as they are legal proof of the application and payment.
4. Board Approval and Share Allotment
Once applications and funds are received, the board of directors or authorised person formally meets to accept the applications and allot (issue) the shares. This step should be recorded in the company’s minutes and registers, as required by ASIC.
If your company operates via the replaceable rules or has a specific constitution, make sure you comply with any additional requirements in those documents.
5. Issuing Share Certificates and Updating Registers
After shares are allotted, the company must:
- Issue a share certificate to the new shareholder (unless your company’s constitution or the law says otherwise)
- Update the company’s share register to reflect the change
- Lodge any necessary forms with ASIC (e.g., Form 484 for changes to share structure)
For more on updating company records with ASIC, read our ASIC Form 484 guide.
Do You Need to Register Your Business as a Company to Issue Shares?
Yes. In Australia, only companies registered with ASIC can issue shares. If you’re a sole trader or in a typical partnership, you don’t have shares to allocate - so a share application process isn’t relevant to those structures.
If you’re just setting up your business, you can choose between structures such as:
- Sole Trader: Owned and controlled by one person, no shares issued.
- Partnership: Two or more owners; again, no company shares issued.
- Company: A separate legal entity registered with ASIC, eligible to issue shares.
Most businesses looking to grow, raise external funds, or formalise founder relationships choose a company structure for this reason. Read more on business names vs. company registration here.
What Legal Requirements Apply to Share Applications?
Getting the share application process right is about more than just paperwork. Several important legal requirements protect both the company and incoming shareholders. Here are the key areas to watch:
Corporations Act 2001 (Cth)
This is the central piece of law for company operations in Australia. It covers everything from share capital to directors’ duties and disclosure rules. Failing to comply can result in penalties or your share issuance being declared invalid.
Company Constitution and Shareholders Agreement
Your company’s constitution (or replaceable rules) may set out rules on share applications, approvals, or transfer restrictions. If you have a shareholders agreement, it’s vital to check that any new share issues don’t breach current arrangements regarding pre-emptive rights or share allocation.
ASIC Obligations
Allotting shares often means you need to update ASIC with your new share structure or shareholders, usually done by lodging Form 484 within 28 days of any change.
Disclosure and Fundraising Laws
Private offers to a small number of people (e.g. friends, family, employees) often don’t require a prospectus or product disclosure statement (PDS), but public offers generally do. Make sure you know which category your share issue falls under. For more, see our overview on raising capital from friends and family.
Directors’ Duties
Your directors have a duty to act in the best interests of the company and avoid conflicts. If shares are issued at below market value, or in a way that favours some over others, this could trigger breaches of directors’ duties or open up disputes. Get advice if you’re unsure.
Australian Consumer Law
If you’re offering shares to outside investors, any statements you make (including in promotional material or on your website) must not be false or misleading under the Australian Consumer Law.
What Legal Documents Do You Need for Share Applications?
To keep your capital raise above board and avoid future headaches, make sure you have these core legal documents prepared and tailored to your situation:
- Share Application Form: The official document investors complete to request shares.
- Board or Shareholder Resolution: A formal record showing the decision to issue shares, as required by law and your company constitution. You can use a directors’ resolution template.
- Share Certificate: Proof of ownership issued to new shareholders once shares are allotted.
- Updated Share Register: A list of all shareholders, required by law to be kept up to date.
- Shareholders Agreement: While not legally mandatory, this is highly recommended if your company has multiple shareholders - it sets out rights, responsibilities, and procedures for issues like exits or bringing in new partners.
- Company Constitution: Outlines the internal rules and processes for share issues and other governance.
- Disclosure Documents: If required, a prospectus or information memorandum for larger or public offers.
Not every business will need all of these, but many will at some point. If you’re unsure about which documents you need (or how to prepare them), it’s best to speak with a legal expert early.
Common Questions About Share Applications
Can I Accept Share Applications for My Business If We Aren’t a Company Yet?
No - only registered Australian companies can issue shares via share applications. If you’re still a sole trader or partnership, consider whether switching to a company structure is right for your goals.
Does Every Share Issuance Need a Formal Share Application?
For most capital raises, yes. Formal applications ensure compliance and legal clarity. However, not every scenario (such as some founder arrangements when incorporating) requires a formal form - but it’s good practice to use one.
What If I Want to Transfer Existing Shares Between Investors?
Share transfer (selling or giving existing shares to someone else) is different from a new share issue. Transfers also require paperwork and may trigger stamp duty or require board approval. For more, check out our guide to transferring shares in Australia.
Who Should Sign a Share Application Form?
The new shareholder (applicant) should sign. If the applicant is a company, an authorised officer (like a director or company secretary) should sign on its behalf.
Do Share Applications Guarantee the Shares Will Be Issued?
No. Applications are an offer to buy shares - the company must formally accept the application and process the allotment. In some cases, the company can reject applications (especially if oversubscribed or if there are restrictions in the constitution or shareholders agreement).
What Happens If Share Applications Are Handled Incorrectly?
Mistakes during the share application process can lead to some serious headaches, such as:
- Disputes over ownership if applications or allotments aren’t properly recorded
- ASIC penalties for failing to update company records or unlawful share issues
- Breach of current shareholders’ rights under the constitution or agreement
- Directors being personally liable if shares are issued unlawfully
- Difficulty attracting future investment due to questionable share history
That’s why we always recommend getting your legal paperwork in order and seeking guidance if you’re unsure at any stage. It’s much easier (and cheaper) to set up things right the first time, rather than fix errors later on.
Key Takeaways
- A share application is a formal request to buy shares in a company - it’s the crucial first legal step for many capital raises and ownership changes.
- Only registered companies in Australia can issue shares; businesses operating as sole traders or partnerships aren’t eligible.
- The share application process involves board approval, issuing the application form, applicant payment, formal share allotment, and ASIC record updates.
- Your company constitution and shareholders agreement may affect how and when shares can be issued - review them before proceeding.
- Having the right legal documents (share application form, resolutions, share certificates, updated register) protects both your business and investors.
- Legal compliance at each step ensures your share issuance is valid, transparent, and can be managed without costly disputes.
- It’s wise to seek legal advice to tailor the process to your business and avoid common pitfalls.
If you would like a consultation on the share application process for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
