Resolution - Directors Authority to Allot

Question 1

Why is this resolution typical?

Answer 1

• Typical for company to obtain authority to allot shares at its AGM, to have flexibility over allotments in the following year, avoids need/expense of calling subsequent GM.

Question 2

What is the CA provision?

Answer 2

• s. 551 CA 2006: an ordinary resolution is required.

Question 3

Why comply with IA guidelines?

Answer 3

• Most listed companies, as a matter of best practice, choose to comply with the IA Guidelines on authority to allot.

Question 4

What do IA guidelines regard as routine for authority to allot?

Answer 4

1. 1.1 – routine to allot
   i) One third of company’s ISC for use in any type of share issue; and
   ii) A further one third which can only be used for fully pre-emptive rights issues only

N.B. this is bc IIG trying to protect SHs from dilution. Doesn’t mean can’t get further authority, but means will need additional resolution.

Question 5

How long do IA say authority should last for?

Answer 5

1.1.3 of IA = although s. 551 provides for maximum of five years authority, IA recommends renewing every year. So authority by OR for a period until next AGM

Question 6

What are the LR requirements?

Answer 6

LR 13.8.1 – a circular relating to a resolution proposing to grant the director’s authority to allot under s. 551 must include:

i) Max amount of shares directors have authority to allot and percentage they represent of total ordinary share capital;
ii) A statement of number of treasury shares held by the company as at date of circular
iii) Statement by directors as to whether they have any present intention of exercising authority and for what purpose
iv) A statement as to when authority will elapse