company DA

Question 1

A newly incorporated company with an entire issued share capital of 100 ordinary shares intends to allot a further 100 ordinary shares to its existing shareholders in the same proportions (that is, pro rata) to the shares they already hold. The company has unamended Model Articles.

Question

Explain why the company does not need to obtain shareholder approval(s) before allotting the shares.

Answer 1

1. As the company has one class of shares and unamended articles of association, under s 550 of the Companies Act 2006 there is no need to obtain shareholder approval to allot further shares. See 7.9.4.2.
2. As the shares are being allotted to existing shareholders and in the same proportion to the shares they already hold, there is no requirement to disapply pre-emption rights. See 7.9.4.4.

Question 2

Scenario 2

Incorporated in 2018, a company with an entire issued share capital of 1,000 ordinary shares intends to allot a further 500 ordinary shares to a newly appointed director who is not an existing shareholder. The company has unamended Model Articles.

Question

Explain what shareholder resolution(s) will be required before the shares can be allotted.

Answer 2

A special resolution will be required to disapply the pre-emption rights. This is because the new shares will not be offered to the existing shareholders in proportion to their shareholdings. See 7.9.4.4 and 7.9.4.6.

However, as the company has only one class of shares, it already has authority under s 550 of the Companies Act 2006 to issue further shares. See 7.9.4.2.

Question 3

Scenario 3

Incorporated in 2018, a company with an entire issued share capital of 500 ordinary shares and 500 preference shares, intends to allot a further 500 ordinary shares to one of its six shareholders. The company has unamended Model Articles.

Question

Explain what shareholder resolution(s) will be required before the shares can be allotted.

Answer 3

As the company has more than one class of shares, it must obtain shareholders’ approval under s 551 of the Companies Act 2006 by way of an ordinary resolution to allot further shares. See 7.9.4.3.

A special resolution will be required to disapply the pre-emption rights because the new shares will not be offered to the existing shareholders in proportion to their shareholdings. See 7.9.4.4 and 7.9.4.6.