Equity Finance

Question 1

Procedure to allot shares

Answer 1

Step 1: Is there a cap? If so need to amend company’s articles (SR for 2006, OR for 1985).

Step 2: Do directors need authority to allot? (not if there’s only one class of shares - unless prohibited from doing so by company’s articles) - OR required unless Articles require higher.

Step 3: Must pre-emption rights be disapplied on allotment? (are we allotting equity securities? If so are we allotting to existing members in existing proportion? If not - disapply preemption rights by SR)

Step 4: Does the company need to create a new class of shares? If yes, need to amend articles by special resolution.

Step 5: Directors allot new shares by board resolution and post-meeting matters to be dealt with.

Question 2

Define ‘Equity Securities’

Answer 2

s.560 CA. i) ordinary shares; or ii) rights to subscribe for, or convert into, ordinary shares.

For this purpose, ordinary shares defined as shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount.

Question 3

Filings - removing share cap

Answer 3

File new articles
For CA 2006 companies - file SR
For CA 1985 companies - file OR

Question 4

Filings - granting directors approval to allot

Answer 4

Authority under s.551 - File OR

Authority under s.550 - 1985 company file OR, no action needed for 2006 company

Question 5

Filings - Disapplying preemption rights

Answer 5

File SR within 15 days of passing

Question 6

Filings - Creating class rights

Answer 6

File SR amending articles; and

File amended articles

Question 7

Filings - allotment of shares by BR

Answer 7

File the prescribed form (SH01) within 1 month of allotment;
File statement of capital;
Update register of members within two months;
Send share certificate to new members; and

Consider whether position in respect of company’s PSC has changed - if so, need to update PSC register.