8c Allotment of Shares Flashcards
Who are shares alloted by and what gives them the authority to do so?
Directors through articles of association, ordinary resolution (need >50% majority and can be written) or implied authority.
What must the authority state for directors to allot shares?
- Max number to be alloted.
- Expiry date for authority.
Can you issue shares at a discount (less than nominal value)?
No per the CA06 you cannot sell shares below nominal value.
What if shares are sold at a discount?
Sale will still be valid but treated as part paid shares in which the shareholder becomes liable to pay.
Can shares be sold at a premium?
Yes, this will be credited to a share premium account which may only be used for the following:
- Funding bonus issues
- Writing off expenses or commission re issue of those shares
What is the different between alloted shares and issued shares?
- Alloted will be when a person has been given an unconditional right to be included within the company’s register of members in respect to those shares.
- Issued is when the person who receives the alloted shares get certification as evidence of ownership.
What are pre-emption rights?
- Rights for first refusal of new shares.
If you have pre-emption rights, how long do you have to accept the shares?
21 days
What happens if the procedure for someone who holds pre-emption rights isn’t followed?
Sale of shares is still valid but holder of the rights can sue for losses within 2 years
When do pre-emption rights not apply?
- Bonus issues
- Sales other then for cash
- Shares issued through employee share scheme.
- A private company can exclude the rights through their articles
What consideration can private companies receive when issuing shares?
- Cash
- Non cash consideration but courts can interfere if there is fraud or consideration is ‘illusory, past or patently inadequate
What are the additional rules around public companies re paying shares?
- Subscribers to memorandum must pay cash.
- Payment cannot be in form of work or services.
- Shares cannot be allotted until at least 25% of nominal value and entire premium has be paid up.
- Non cash consideration must be received within 5 years.
- Non cash consideration must be independently valued and reported on by a person qualified to be the companies auditor.
When must the allotment of shares be registered?
Within 2 months and a return must be delivered to registrar with a revised statement of capital.
What happens if a company doesn’t deliver their return and a revised statement of capital for the registrar after alloting shares?
Every officer of the company are punishable by fine.
What happens if a shareholder wants to sell their unlisted shares?
Seller holds shares on trust for the purchaser once an agreement is in place.
Seller then fills in a stock transfer form which needs to be registered within 2 months.
The company must also prepare a share certificate.
What happens if a transfer of unlisted shares is refused?
The transferee is still entitled to dividend or return on capital but has no vote.
How are listed shares transferred?
Electronically using the CREST system which is the multi-currency settlement system for the UK and Irish countries.
What does The Disclosure and Transparency rules state about the transfer of listed shares?
Shareholder must notify the issuer if their shareholding reaches 3% and then for every 1% increase after both within 2 trading days.
How can shares capital be altered?
- Subdivided or consolidated (proportion of paid and unpaid must stay the same).
- Redenominated in another currency (needs special resolution and must not exceed 10% of the nominal value of reducddd share capital).
