The Procedure of Allotment of Shares Flashcards
What is share capital?
The money raised by the issue of shares
How many stages does a company go through to issue shares?
5
What are the 5 steps for issue of shares?
1) Any cap on number of shares?
2) Do company’s directors need authority to allot?
3) Must pre-emption rights be disapplied to allot?
4) Must new class rights be created for the shares?
5) Directors must pass a board resolution
Which companies have a cap on the number of shares?
Companies incorporated pre 1 October 2009 (under CA 1985)
What is the cap on the number of shares in a CA 1985 Company?
The authorised share capital
Do companies after 1 October 2009 have a cap?
No, unless specifically stated in Articles
How can authorised share capital cap be removed?
For CA 1985 incorporations, will only need an ordinary resolution.
If a CA 2006 with an amended Article, will need a special resolution.
When do company’s directors need authority to allot?
- Private company with more than one share of class
- For all other companies – will need ordinary resolution
When can directors allot without the need of shareholder approval?
CA 2006 - For private companies with only one share of class, can allot new shares in the same class
Can directors allot for private companies with one share of class if CA 1985?
Will need an ordinary resolution to authority the directors to rely on CA 2006
What is a pre-emption right?
Right of first refusal – existing shareholders should be offered pro rata before any new investor
What must be done if pre-emption rights need to be disapplied?
A special resolution
What are equity securities?
i) Ordinary shares
ii) Rights to subscribe for, or convert securities into, ordinary shares
What shares do not fall in the definition of ordinary shares for the purposes of equity securities?
If dividends AND, on a winding up, capital payments, are both capped
What is the rule on equity securities?
Must be offered to existing shareholders in proportion to their existing shareholdings, before they can be offered outside
Can a company disapply pre-emption rights?
Yes
How does a company generally disapply pre-emption rights?
Through special resolution / disapplication of articles
How does a company specifically disapply pre-emption rights for one allotment?
Again, through a special resolution
What must directors provide for specific disapplication of pre-emption rights?
i) Reasons for specific disapplication
ii) The amount to be paid to company pursuant to allotment along with justification
How is a new class of right created for shares?
It is created via special resolution via amendment of its Articles
When can Directors finally pass a board resolution to allot shares?
1) No limit in number of shares in constitution
2) Does not require director’s authorisation or has been authorised
3) Issuing shares to shareholders in line with pre-emption rights / or has been disapplied
4) Has the relevant class rights in its Articles
What are administrative requirements on allotment?
1) Copies of resolution sent to Companies House within 15 days
2) Company forms sent to Companies House
3) Updating company registers
4) Issue of share certificates
