BL - Shares - Allotting Flashcards
Which companies will have an authorised share capital by default?
- Companies formed before 1 October 2009 i.e. under CA 1985.
Authorised share capital acted as a ceiling on the number of shares a company could issue. The cap must be removed if the company wishes to issue further shares.
Remove Cap
How can you remove an authorised share capital cap?
CA 1985 - amend company articles by ORDINARY RESOLUTION
CA 2006 - amend company articles by SPECIAL RESOLUTION (company must have added a cap to its articles)
Give Dir permission to Allot
What do the directors need to do to allot?
requires a board resolution:
Private companies with only one class of shares:
- CA 2006 - s.550 CA 2006 directors have automatic power to allot for (doesn’t include making a new class).
- CA 1985 - directors need an ordinary resolution to rely on s.550 CA 2006 above.
For all others:
- an ordinary resolution is required to allow the directors to allot
Remove Pre-emption Rights
What does first refusal mean when considering an allotment of new EQUITY SECURITIES?
- ‘right of first refusal should be offered to the current shareholders on a pro-rat basis.
- s.561 CA 2006 contains pre-emption rights. Removal of pre-emption rights requires a SPECIAL RESOLUTION.
Remove Pre-emption Rights
What are ‘equity securities’?
Shares other than shares that as respects dividends AND capital carry a right to participate only up to a specified amount.
(Any shares other than fixed preference shares)
Remove Pre-emption Rights
What is the GENERAL disapplication of pre-emption rights
passing a SPECIAL resolution to disapply its articles.
Create new share class
How does the company issue a new class of shares?
Company will need to insert new provisions in its articles by SPECIAL resolution
A board meeting is required to allot new shares. When will a general meeting beforehand NOT be required?
- has no limit in its constitution on the number of shares that can be issued
AND
-does not require directors authorisation because the company is private with only one class of shares issuing the same sort of share and there is no restriction in the ART or has already given Dir authority to allot the shares,
AND
-is issuing shares to existing shareholders under s562 (method for pre-emption), or has already disapplied s561 (pre-emption rights).
AND
has the relevant class rights in its articles
What is the process for allotting new shares?
- 1) Remove Cap (if applicable)
- 2) Give Dir permission to Allot
- 3) Remove Pre-emption Rights
- 4) Create new share class (if needed)
What is the process for allotting shares for a CA’85 private company with one class of shares?
- OR to remove share cap
- OR under s.551 to rely on s.550 (giving the dir right to allot)
- SR to remove pre-emption rights
- NO NEED TO CREATE NEW SHARE CLASS
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
What is the process for allotting shares for a CA’06 private company with one class of shares?
- NO CAP TO REMOVE
- DIRECTORS HAVE AN AUTOMATIC RIGHT TO ALLOT
- SR to remove pre-emption rights
- NO NEED TO CREATE NEW SHARE CLASS
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
What is the process for allotting shares for a CA’85 private company with a different class of equity shares?
- OR to remove share cap
- OR under s.551 to rely on s.550 (giving the dir right to allot)
- SR to remove equity share pre-emption rights
- SR to amend articles to create new share class
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
.
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
What is the process for allotting shares for a CA’85 private company with a different class of non-participating preference shares with fixed dividend and capital rights?
- OR to remove share cap
- OR under s.551 to rely on s.550 (giving the dir right to allot)
- NO NEED TO REMOVE EQUITY SHARE PRE-EMPTION RIGHTS
- SR to amend articles to create new share class
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
What is the process for allotting shares for a CA’06 private company with a different class of equity shares?
- NO CAP TO REMOVE
- OR under s.551 to rely on s.550 (giving the dir right to allot diff share class)
- SR to remove pre-emption rights
- SR to amend articles to create new share class
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
What is the process for allotting shares for a CA’06 private company with a different class of non-participating preference shares with fixed dividend and capital rights?
- NO CAP TO REMOVE
- OR under s.551 to rely on s.550 (giving the dir right to allot diff share class)
- NO NEED TO REMOVE EQUITY SHARE PRE-EMPTION RIGHTS
- SR to amend articles to create new share class
ADMIN
- Return of allotment and statement of capital to Coy house (1 month)
- Update persons with significant control
- Update register of members within 2 months
- Share certs. sent to new shareholders within 2 months
