Allotment, transfer and transmission of shares Flashcards
What is the difference between allotting and transferring shares?
Allotment – issuing new shares to a new shareholder
Transfer – a shareholder transferring shares to a new shareholder
What is a restriction on allotment?
A private company cannot offer shares to the general public
What is a prospectus?
A company must consider whether it needs to offer shareholder a prospectus with information about the company to make informed decision
Does a private company need to offer a prospectus?
Typically, no. But rules need to be considered.
What is the definition of financial promotions?
Invitation or inducement to engage in investment activity (including buying shares)
Are financial promotions prohibited?
Yes, unless certain requirements set out in FSMA are fulfilled
Who can make communications by a company when issuing shares?
An authorised person who is appointed by the FCA to approve financial promotions
What is the transmission of shares?
An automatic process in the event of death or bankruptcy
What happens to their shares if a shareholder dies?
Will automatically pass onto personal representatives
What happens to their shares if a shareholder is made bankrupt?
Their shares automatically vest in their trustee in bankruptcy
Can shareholders transfer their shares to whom they want?
Yes, provided no restriction in the Article’s
Can a shareholder gift shares?
Yes
What are the two common restrictions on transfer?
- Directors’ power to refuse to register
- Pre-emption clauses (rights of first refusal)
What is the directors’ power to refuse to register? What is the effect?
They may refuse to register. The instrument of transfer then must be transferred to the transferee with notice of refusal. Unless they suspect it was fraudulent.
What does the notice of refusal for registration of shares have?
Reasons for its refusal to register a transfer
Are there pre-emption rights on a transfer of shares?
No, not included in the Model Articles
How would rights on a transfer of shares be included in a Company?
By including it in the Articles of Association
What is the instrument of transfer of shares?
A stock transfer form – signed by transferor and submitted with share certificate, to the new shareholder
When does beneficial title of a share pass to new shareholder?
On execution of stock transfer form
When does legal title of a share pass to new shareholder?
On registration in the register of members by the Company
When is stamp duty payable on stock transfer form?
When the consideration is more than £1,000
What is the stamp duty rate for stock transfer form?
0.5% of consideration rounded up to the nearest £5
