Chapter 5: Equity Finance Flashcards
Introduction to shares
This element introduces how a company raises finance and explores the different types of rights that may attach to shares. We also look briefly at variation of class rights and dividends.
The concepts of allotment, transfer and transmission of shares are explained in the next element.
What is capital?
The general term ‘capital’ is used to refer to the funds available to run the business of a company. In company law, the term ‘share capital’ relates to the money raised by the issue of shares. The share capital is contributed by investors in the company and is represented by shares that are issued to such investors.
Why does a company need funds?
When a company is set up, funds are needed to get the business started, eg to buy stock and machinery. Funds are also needed to keep the business going, commonly known as ‘working capital’. Funds are also needed for expansion and growth, eg by taking on new premises or buying other businesses.
How does a company fund its business?
There are various ways in which a company can raise funds, including by issuing shares, (ie ‘equity finance’); borrowing (ie ‘debt finance’); and/or retaining its profits for use in the business (rather than paying the profits to the shareholders).
Equity finance: what are shares?
A share is often described as a ‘bundle of rights’.
By investing in the share capital of any company, the investor becomes a part owner of the company and will often have voting rights in shareholder meetings. In the case of a private company, most investors make a long-term investment and will only usually get their investment back on a sale of their stake, a sale of the company itself, on a flotation, or when the company is wound up (provided sufficient funds are available).
Equity Finance: What are shares?
The incentives for investing would be the receipt of income (by way of dividend) and a capital gain (by way of the growth in the value of the company, and therefore the individual shares), although neither are guaranteed.
Different classes of shares may carry different rights and entitlements. All rights and entitlements in relationto shares of all classes are set out in the Articles. It is imperative to check these.
Share capital structure
Nominal or par value
Section 542(1) CA 2006 provides that the shares in a limited company having a share capital must have a fixed nominal value. Section 542(2) CA 2006 provides that any allotment of a share that does not have a fixed nominal value is void. The nominal or par value of a share is the minimum subscription price for that share.
It represents a unit of ownership rather than the actual value of the share. Common nominal values for ordinary shares are 1p, 5p or £1.
Section 580 CA 2006 provides that a share may not be allotted/issued by a company at a discount to its nominal value.
Premium
However, a share may be allotted/issued for more than its nominal value, and the excess over nominal value is known as the ‘premium’. The market value will often be much higher than the nominal value of the share.
Issued Shares
The amount of shares in issue at any time is known as the issued share capital (‘ISC’). This is the amount of share capital that will be shown in the company’s balance sheet in its accounts. This was the same under CA 1985. A company’s ISC is made up of:
- shares purchased by the first members of the company, known as the ‘subscriber shares’; and
- further sharesissuedafter the company has been incorporated, to new or existing shareholders. New shares can be issued at any time provided that the correct procedures are followed.
Allotted Shares
‘Allotment’ is defined in s 558 CA 2006. Shares are said to be allotted when a person acquires the unconditional right to be included in the company’s register of members in respect of those shares. This term is often used interchangeably with the issue of shares but the terms have different meanings. There is no statutory definition of ‘issue’, but it has been held that shares are only issued and form part of a company’s issued share capital once the shareholder has actually been registered as such in the company’s register of members, and their title has become complete. Section 112(2) CA 2006 confirms that full legal title to shares is only achieved once a person’s name is entered in the company’s register of members.
Called-up/Paid-up Shares
It is not necessary for shareholders to pay the full amount due on their shares immediately. The amount of nominal capital paid is known as the ‘paid-up share capital’. The amount outstanding can be demanded by the company at any time. Once demanded, the payment has been ‘called’. It is increasingly rare for shareholders not to pay the full nominal value of their shares on issue.
The definition of ‘called-up share capital’ in s 547 CA 2006 is the aggregate amount of the calls made on a company’s shares and the existing paid-up share capital. Given that shares are rarely not fully paid up, this term is not regularly used.
Treasury shares
These are shares that have been bought back by the company itself and are held by the company ‘in treasury’. Treasury shares are issued shares being held by the company in its own name, and the company can subsequently sell those shares out of treasury.
Note that although such a sale of shares is a transfer, not an issue, of shares, s 561 CA 2006 pre-emption rights (see s 560(3) CA 2006) and s 573 CA 2006 disapplication of pre-emption rights will apply.
The company can also choose to cancel treasury shares at any time or transfer them to an employee share scheme.
Classes of shares
A company may have different classes of shares. Some common types of share are listed below. The differing rights usually relate to entitlements to vote, entitlements to dividends and to the return of capital when a company is wound up. There is nothing in CA 2006 which defines classes of shares or class rights and the label attached to a share is not determinative.
The rights attached to a class of shares are determined in the company’s Articles.
Ordinary shares
Redeemable shares
Preference shares
Non-voting shares
Employees’ shares
Cumulative shares
Convertible shares
Deferred shares
Ordinary shares
Ordinary shares the most common form of share and are the default position: if a company’s shares are issued without differentiation, they will be ordinary shares.
Ordinary shares carry a right to vote in general meetings, a right to a dividend if one is declared and a right to a portion of any surplus assets of the company on a winding-up. A company may have more than one class of ordinary share, with differing rights, and perhaps differing nominal values.
Definition of ordinary shares
Ordinary shares are defined in s 560(1) CA 2006 as “shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution”. This negative definition illustrates the point that ordinary shares are the default position and are shares that have an unlimited right to participate in dividends and in surplus capital when a company is wound up. These shareholders receive a fraction of the dividend and capital in accordance with their shareholding.
Preference shares
A preference share may give the holder a ‘preference’ as to payment of dividend or to return of capital on a winding up of the company, or both. This means the payment will rank as higher priority than any equivalent payment to ordinary shareholders.
If there is a preference as to dividend, this will be paid before the other shareholders receive anything.
The amount of preferred dividend is usually expressed as a percentage of the par (nominal) value of the share eg 5% £1 preference shares – these shares give an entitlement to 5% of £1 per share (which equates to 5p per share) by way of dividend each year provided a dividend is declared.
Preference Shares
If the preference shares have been issued at a premium to their par value and it is intended that a fixed dividend will be paid based on the amount subscribed for the share (ie par plus premium), the share rights must expressly state that the dividend is to be calculated as a percentage of the total subscription price per preference share.
Preference shares are normally non-voting although it is important to check the rights set out in the Articles since it is possible to issue preference shares with voting rights.
Cumulative preference shares
It is presumed that a preference share is ‘cumulative’ unless otherwise stated. This means that if a dividend is not declared for a particular year, the right to the preferred amount on the share is carried forward and will be paid, together with other dividends due, when there are available profits. If this accumulation is not desired, then the share must be expressed to be non-cumulative.
Participating preference shares
‘Participating’ preference shareholders may participate, together with the holders of ordinary shares, (1) in surplus profits available for distribution after they have received their own fixed preferred dividend; and/or (2) in surplus assets of the company on a winding up. As with preference shares, participating preference shares are almost always issued with a fixed dividend and can be cumulative if stated as such in the articles of association. Participating preference shares with these characteristics are generally called ‘fixed rate participating cumulative preference shares’.
Example
Company A has participating preference shares in issue which carry a right to receive a fixed preferential dividend of 5% of the par value of the shares per annum. The shares have a par value of £1 each.
Assuming that a dividend has been declared, the preference shareholders would be entitled to receive a dividend of 5p per share per annum before the ordinary shareholders receive any dividend. They would then also be entitled to a fraction of the remaining general dividend alongside the ordinary shareholders.
Example
Company B has non-participating preference shares in issue which carry a right to receive a fixed preferential dividend of 5% of the total subscription price per share per annum. The shares have a par value of £1 each but were subscribed for at a price of £2 per share.
Assuming that a dividend has been declared, the preference shareholders would be entitled to receive a dividend of 10p per share per annum before the ordinary shareholders receive any dividend. They would not be entitled to any further dividend.
Deferred, redeemable and convertible shares
Deferred shares
These carry no voting rights and no ordinary dividend but are sometimes entitled to a share of surplus profits after other dividends have been paid (presuming there is a surplus); more usually ‘deferred’ shares carry no rights at all and are used in specific circumstances where ‘worthless’ shares are required.
Redeemable shares
Redeemable shares are shares which are issued with the intention that the company will, or may wish to, at some time in the future, buy them back and cancel them.
Convertible shares
Such shares will usually carry an option to ‘convert’ into a different class of share according to stipulated criteria.
Variation of class rights
A company may issue different classes of share, as seen above. The rights attaching to each class are usually set out in the company’s Articles. In relation to any type of share, you should always refer to the Articles to find the relevant rights attaching to a share, since there are no formal, universal definitions of different types of share.
Variation of Class Rights
If an attempt is made to alter the Articles of a company such that existing class rights are varied, the resolution in question will not be effective unless varied in accordance with provisions in the company’s Articles for the variation of those rights or, where Articles don’t contain such provisions, by consent in writing of holders of at least 75% of the issued shares of that class or by means of a special resolution passed at a separate general meeting of holders of that class (s 630 CA 2006).
Variation of Class Rights
Shareholders holding 15% of the relevant shares may (provided they did not vote in favour of the variation) apply to court within 21 days of the resolution to have a variation cancelled (s 633(2) CA 2006). Following such application, the variation will not take effect unless and until it is confirmed by the court. The court will not confirm the variation if it feels that the variation unfairly prejudices the shareholders of the class in question.
Dividends
The main reason for shareholders to invest in shares in a company is generally to make money. Shareholders may receive a return on their investment in two ways:
- By receipt of dividends (income receipts), and
- An increase in the capital value of the shares.
Dividends are only payable by a company if it has sufficient distributable profits (s 830(1) CA 2006).
‘Distributable profits’ means the company’s accumulated realised profits less its accumulated realised losses (s 830(2))
There are two types of dividends
Final dividends – Final dividends are recommended by the directors and declared by the company by an ordinary resolution of the shareholders following the financial year end.
Interim dividends - The articles of a company normally give the directors the power to decide to pay interim dividends if the company has sufficient distributable profits (MA 30 allows this). Interim dividends can be paid without the need for an ordinary resolution of the shareholders. Interim dividends are often paid where the company has realised an investment.
Summary
*The term ‘share capital’ relates to the money raised by the issue of shares.
- A share is a ‘bundle of rights’ in a company that often provide voting rights. Shares (and the rights attaching to them) can broadly be categorised into six groups:
- ordinary shares;
- preference shares;
- participating preference shares;
- deferred shares;
- redeemable shares; and
- convertible shares.
- There are no statutory definitions of different types of shares. The rights attaching to shares are set out in the company’s Articles.
Allotment, transfer and transmission of shares
This element considers some important restrictions on allotment and sets out the process by which a company may transfer shares. Transmission of shares on death or bankruptcy is also covered. The procedure for issuing new shares is covered in the next element.
What is the difference between allotting and transferring shares?
An allotment of shares is a contract between the company and a new/existing shareholder under which the company agrees to issue new sharesin return for the purchaser paying the subscription price.
A transfer is a contract to sell existing shares in the company between an existing shareholder and the purchaser.The company is not a party to the contract on a transfer of shares (with the exception of a sale out of treasury of treasury shares).
Considerations on allotment
The s 755 restriction on private companies offering shares to the public. Under s 755 CA 2006 a private company limited by shares is prohibited from offering its shares to the public. As a result, private companies are essentially restricted to offering their shares to targeted investors only and not to the public indiscriminately.
Offer to the Public
The expression ‘offer to the public’ (as defined in s 756 CA 2006) covers offers to ‘any section of the public’ but excludes offers which are intended only for the person receiving them and offers which are a ‘private concern’ of the persons making and receiving them. This latter exclusion covers offers made to existing shareholders, employees of the company and certain family members of those persons, and offers of shares to be held under an employee’s share scheme. These excluded offers will not fall foul of the s 755 restriction.
This restriction must be considered carefully when a private company is proposing to allot shares.
The requirement for a prospectus
Every time that a company offers shares you will need to consider whether it is required to publish a prospectus to would-be investors. A prospectus is an explanatory circular giving investors details about the company and about the investment itself on which to base their investment decision.
A prospectus should contain all the information necessary to enable investors to make an informed assessment of the financial status of the company and the rights attaching to the shares (s 87A(2) FSMA), and preparing a prospectus is therefore an expensive and time-consuming process. In an offer of shares by a private company, it will usually be the case that a prospectus will not be required. However, you will need to consider the rules each time.
Financial Promotions
Under s 21 FSMA (as amended by FSMA 2023) a financial promotion is any invitation or inducement (in the course of business) to engage in investment activity (which includes buying shares). Financial promotions are prohibited (for all companies) unless certain requirements set out in FSMA are fulfilled. Clearly this is potentially relevant when a company is considering issuing shares to investors. Communications made by a company when issuing its shares must, either be within an exemption from the s 21 FSMA prohibition or be issued or approved by an authorised person, who must now be appointed by the FCA to approve financial promotions. There is more information about this in the Legal Services Workbook.
Transfer and transmission of shares
Transmission of shares is an automatic process in the event of death or bankruptcy of a shareholder as follows:
- If a shareholder dies, their shares will automatically pass to their personal representatives.
- If a shareholder is made bankrupt, their shares automatically vest in their trustee in bankruptcy.
Transfer
Shares may be transferred from an existing shareholder to a new shareholder by way of sale or gift.
Shareholders are free to transfer their shares subject to any restrictions in the Articles (s 544(1) CA 2006).
It is therefore important to check the Articles for any restrictions on transfer.
Some common restrictions are set out below.
Restrictions on transfer
The two most common forms of restriction are:
- Directors’ power to refuse to register
Article 26(5) MA states: “The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent”.
Under s 771 CA 2006, a company must give reasons if it refuses to register a transfer.
Restrictions on Transfer
- Pre-emption clauses (rights of first refusal)
Here we are looking at pre-emption rights on a transfer of shares (which should not be confused with pre-emption rights on allotmentunder s 561 CA 2006). Such rights are usually set out in the articles. CA 2006 and MA do not contain any pre-emption rights on transfer, so they must be specially inserted into the Articles of any company wishing to establish them. Pre-emption rights on transfer will often require that a shareholder wishing to sell shares must offer them to the other existing shareholders before being able to offer them to an outsider.
Method of Transfer - Instrument of Transfer
A transfer of shares is made by way of a stock transfer form, which has to be signed by the transferor and submitted, with the share certificate, to the new shareholder (s770 CA 2006).
Legal & Equitable Ownership
Beneficial title to the shares passes on the execution of the stock transfer form. Legal title passes on the registration of the member as the owner of those shares in the register of members by the company (s 112 CA 2006). The company will also send the shareholder a new share certificate in this name within two months (s 776 CA 2006).
Stamp Duty
The stock transfer form must be stamped before the new owner can be registered as the holder of those shares. Stamp duty is payable by the buyer at 0.5% of the consideration rounded up to the nearest £5. No stamp duty is payable where the consideration is £1000 or less; but where the consideration is more than £1000, a minimum fee of £5 is payable.
Summary
- It is possible for a company to allot new shares or for existing shares to be transferred between shareholders by way of sale or gift.
- Private limited companies are prohibited from offering shares to the public.
- When a shareholder is seeking to transfer shares, the Articles must always be checked to ensure there are no restrictions on transfer or pre-emption rights.
- Transfer of shares is effected by the transferor signing a stock transfer form and giving this to the transferee together with the share certificate.
- Stamp duty is payable on transfer of shares at 0.5% (subject to a minimum payment of £5) where the sale price exceeds £1,000.
- Transmission of shares is an automatic process in the event of death or bankruptcy of a shareholder.
Proceedure for the Allottment of Shares
Introduction
Remember, in company law, the term ‘share capital’ relates to the money raised by the issue of shares. The share capital is contributed by investors in the company and is represented by shares that are issued to such investors.
Many companies will be incorporated with just one single share. As a way of raising finance, the company may choose to issue more shares.
Introduction to the Proceedure: 5 steps
In the context of issuing shares, it is important that you appreciate whether the company you are instructed by has been incorporated under the CA 2006 or the CA 1985 as there are differences between the way in which these companies will issue shares.
In this element, you will consider the five-step process which a company needs to go through to issue shares. It could be that no action is needed at one or more of the stages. However, working through the five stages in each case will aid your understanding and ensure that you identify all the steps required in each particular case.
STEP 1: Any cap on the number of shares that may be issued?
Before issuing new shares, you must check the company’s Articles for any cap or limit on the number of shares that may be issued. If this is to be exceeded, the cap must be removed, or the limit increased.
A company incorporated under CA 1985 will originally have had an authorised share capital (‘ASC’), which acted as a ceiling on the number of shares it could issue. These companies (since 1 October 2009) will continue to have a deemed ceiling on the number of shares that can be issued, in their articles, unless such cap is removed from their Articles.
The requirement for a company to have an ASC no longer exists under CA 2006. Companies incorporated under CA 2006 will not have an authorised share capital and shareholders wishing to impose a cap to restrict the number of shares which such a company can issue will need to amend the Articles (by special resolution) to include suitable provisions.
How can the cap be removed?
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For companies incorporated under CA 1985, shareholders wishing to remove or amend the deemed restriction in a company’s Articles may do so by ordinary resolution. This is despite the fact that removing such a deemed restriction involves changing the Articles, which would normally require a special resolution under s 21(1) CA 2006.
Any such deemed restriction will also fall away as a consequence of the company adopting, wholesale, new Articles (such as MA) which do not include provision for any cap (applying s 21(1) CA 2006).
How can the cap be removed
Companies incorporated under CA 2006 will not have an authorised share capital. For such companies, therefore, there will be no bar to issuing shares under step 1.
The only exception would be if the company has placed a provision in its Articles limiting the number of shares that may be issued. If such a restriction exists, it can be removed, or the limit increased, by special resolution under s 21(1) CA 2006.
Under s 617(2)(a) CA 2006, each time a company issues shares, its share capital increases automatically.
Step 1: Summary
For step 1, you must therefore check:
- whether any resolutions to remove, impose or change any cap, or increase the share capital, have been passed, and ensure that you have up-to-date information (particularly checking the company’s Articles); and
- whether any shares have been issued by checking the register of members or the most recent confirmation statement*filed at Companies House and any subsequent forms filed on allotments of shares (using Form SH01 under s 555 CA 2006).
For step 1, you must therefore check:
- If the company does not have a limit on its share capital or if there are sufficient unissued shares available within any cap for a proposed new issue, the company can proceed to step 2.
*Companies are required to file an annual confirmation statement. This confirmation statement states (‘confirms’) that the company has filed all necessary returns in the previous 12-month period (eg changes to registered address, changes to directors or company secretary etc). It also sets out any changes to share capital.
STEP 2: Do the company’s directors need authority to allot?
Directors are responsible for the actual allotment of shares to a shareholder and they must resolve by board resolution to make an allotment. However, they may need to have the prior authority of the shareholders to be able to do this.
Section 549 CA 2006 provides that the directors of a company must not exercise any power of the company to allot shares in the company except in accordance with:
Section 550 and 551 CA 2006
- s 550 CA 2006: for private companies with only one class of shares in existence, the directors will have automatic authority to allot new shares of the same class, or
- s 551 CA 2006: for all other companies, the directors will need to be granted authority to allot the new shares by the shareholders by way of ordinary resolution.
Section 550 – Private companies with only one class of share
In private companies with only one class ofshare, s 550 CA 2006 provides that directors have the automatic power to allot shares of that same class, unless they are prohibited from doing so by the company’s Articles.
This helps many smaller companies to simplify the process of issuing shares, since no shareholder resolution is required to grant authority to directors to allot the new shares.
Note that for companies incorporated under CA 1985, an ordinary resolution is required to authorise the directors to rely on s 550 CA 2006.
All other cases: Section 551 CA 2006
If s 550 CA 2006 cannot be relied upon, directors require authority under s 551(1) CA 2006, which provides that authority may be given by a provision in the company’s Articles or by shareholder resolution. Under s 281(3), this means an ordinary resolution unless the Articles require a higher majority. You would therefore need to check the latest version of the company’s Articles and any resolutions that have been passed giving the directors authority, in order to establish whether further authority is required.
Authority to Allot
Authority to allot under s 551(1) CA 2006 can only be given subject to limits in terms of both time and number of shares (s 551(3) CA 2006). This means that if the company has already granted its directors a s 551(1) CA 2006 authority, it must be checked to ensure it is still valid.
STEP 3: Must pre-emption rights be disapplied on allotment?
What does a ‘pre-emption right’ mean?
It means the ‘right of first refusal’. New shares should be offered pro rata to existing shareholders before any new investor.
This is because, when a company allots shares to new shareholders, there is an effect on the proportionate ownership of the company held by the existing shareholders. Their ownership is diluted, and therefore their entitlement to dividends and voting power is also diluted.
What does pre-emption rights mean
Due to the potential dilution, s 561 CA 2006 contains pre-emption rights, which give protection to existing shareholders.
Where pre-emption rights apply, the most usual approach is for the company to request the existing shareholders to disapply these pre-emption rights by special resolution.
To what type of shares are pre-emption rights relevant?
Section 561 CA 2006 states as follows:
”(1) A company must not allot equity securities to a person on any terms unless
(a) it has made an offer to each person who holds ordinary shares in the company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the ordinary share capital of the company …”
To what type of shares are pre-emption rights relevent?
As a result, any new ‘equity securities’ (defined ins 560 CA 2006) must be offered to the existing shareholders of a company (holding ordinary shares), in proportion to their existing shareholdings, before they can be offered to anyone outside the company.
Under s 560(1) CA 2006, ‘equity securities’ are (i) ‘ordinary shares’ or (ii) rights to subscribe for, or convert securities into, ordinary shares.
However, under s 560(1) there is a special statutory definition of ‘ordinary shares’, the meaning of which is wider than we are accustomed to in everyday parlance.
Ordinary Shares
‘Ordinary shares’ are shares ‘other than shares that as respects dividends and capital carry a right to participate only up to a specified amount’ for this purpose.
This means that if a class of shares carries a right to receive dividends and, on a winding up, capital payments, and these rights are both capped, the shares will not fall within the definition of ‘equity securities’ and will not need to be offered pre-emptively.
In every other case, the shares will fall within the definition of ‘equity securities’ and be subject to pre-emption rights under s 561 CA 2006.
Can a company disapply pre-emption rights?
Yes. The procedure for giving effect to pre-emption rights (which can be found in s 562 CA 2006) can be lengthy and, especially for companies with numerous shareholders, complicated to carry out.
On many occasions it will not be appropriate or desirable to follow the pre-emption rights procedure set out in CA 2006: for example, where all shareholders agree that the company ought to bring in a new shareholder. In such a case, the company would want to disapply or exclude the pre-emption rights. This is permitted in CA 2006, with the permission of the company’s existing shareholders.
In practice, companies usually use one of these two methods to disapply pre-emption rights, depending on the source of the directors’ authority to allot the shares.
- General disapplication of pre-emption rights
A company may disapply pre-emption rights where the directors are generally authorised for the purposes of s 551 CA 2006 by passing a special resolution or by including the disapplication in its articles, both under s 570(1) CA 2006. This is not a permanent disapplication, but attaches to a particular, pre-existing s 551 authority. In practice, this is the most common means by which companies dispense with pre-emption rights on allotment.
- Private companies with one class of share – disapplication by special resolution
Section 569 CA 2006 provides for disapplication of pre-emption rights for private companies with only one class of share by special resolution. Such a disapplication presupposes the directors’ authority to allot the shares derives froms 550 CA 2006 and therefore can apply for so long as the company has in issue, and allots, shares of only one class.
- There are other ways to disapply pre-emption rights:
- Specific disapplication of pre-emption rights: It is possible, although uncommon, for a company to disapply pre-emption rights in relation to a specific allotment of shares (eg in relation to shares being issued to a particular person or as consideration for a specific purpose) by passing a special resolution under s 571 CA 2006 (rather than s 570 CA 2006). The procedure for specific disapplication is more cumbersome than that for a general disapplication.
Directors will need to provide the company’s shareholders with a written statement explaining (i) the reasons for the specific disapplication, and (ii) the amount to be paid to the company pursuant to the allotment along with justification for the amount, under s 571(6) CA 2006. A specific disapplication under s 571 attaches to a particular, pre-existing s 551 authority.
- Private companies – exclusion of pre-emption rights in Articles (s 567 CA 2006)
Private companies can exclude statutory pre-emption rights permanently, by way of a provision in their Articles. However, companies rarely exclude pre-emption rights on a permanent basis because this would give existing shareholders no protection from dilution (there is no such provision in MA). In practice, only subsidiary companies commonly exclude statutory pre-emption provisions in their Articles.
- Private companies with one class of share – disapplication in Articles (s 569 CA 2006):
provides for disapplication of pre-emption rights for private companies with only one class of shareunder the Articles. This is also unusual in practice because it leaves existing shareholdings with no protection from dilution.
