Protection for shareholders (When issuing new shares)

Question 1

4 Protections for shareholders

Answer 1

1. Limit on the company’s authorized share capital
2. Limitations on the power of directors to issue new shares
3. pre-emption rights (rights of first refusal)
4. Class rights

Question 2

1. Limitation on the company’s authorised share capital - statute

Answer 2

s28 CA 2006

Question 3

2. Limitations on the power of directors to issue new shares-

directors have no power to issue shares except

Answer 3

s549

Question 4

2. Limitations on the power of directors to issue new shares-

exceptions (1) : directors of a private company that has only a single class of shares, automatic authorisation

Answer 4

s550

Question 5

2. Limitations on the power of directors to issue new shares-

exceptions (2) : ordinary resolution needed

Answer 5

s551

Question 6

3. Pre-emption rights (rights of first refusal)

Answer 6

s561

Question 7

3. Pre-emption rights-
   equity securities- statute

Answer 7

s560(1)

Question 8

• ordinary shares in the company
• rights to subscribe for, or the convert securities into, ordinary shares in the company

Answer 8

equity securities

Question 9

3. Pre-emption rights -

Answer 9

• bonus shares
• issued under an employee share scheme
• issued for non-cash consideration (s564)

Question 10

3. disapplication of pre-emption rights?

ordinary vs special resolution

Answer 10

special resolution

Question 11

3. Disapplication of pre-emption rights- statues

Answer 11

s569-s571

Question 12

4. Class rights- which resolution is required to amend the company’s articles in order to set out the new class rights

Answer 12

special resolution