8c Allotment of Shares Flashcards
Who are shares alloted by and what gives them the authority to do so?
Directors through articles of association, ordinary resolution (need >50% majority and can be written) or implied authority.
What must the authority state for directors to allot shares?
- Max number to be alloted.
- Expiry date for authority.
Can you issue shares at a discount (less than nominal value)?
No per the CA06 you cannot sell shares below nominal value.
What if shares are sold at a discount?
Sale will still be valid but treated as part paid shares in which the shareholder becomes liable to pay.
Can shares be sold at a premium?
Yes, this will be credited to a share premium account which may only be used for the following:
- Funding bonus issues
- Writing off expenses or commission re issue of those shares
What is the different between alloted shares and issued shares?
- Alloted will be when a person has been given an unconditional right to be included within the company’s register of members in respect to those shares.
- Issued is when the person who receives the alloted shares get certification as evidence of ownership.
What are pre-emption rights?
- Rights for first refusal of new shares.
If you have pre-emption rights, how long do you have to accept the shares?
21 days
What happens if the procedure for someone who holds pre-emption rights isn’t followed?
Sale of shares is still valid but holder of the rights can sue for losses within 2 years
When do pre-emption rights not apply?
- Bonus issues
- Sales other then for cash
- Shares issued through employee share scheme.
- A private company can exclude the rights through their articles
What consideration can private companies receive when issuing shares?
- Cash
- Non cash consideration but courts can interfere if there is fraud or consideration is ‘illusory, past or patently inadequate
What are the additional rules around public companies re paying shares?
- Subscribers to memorandum must pay cash.
- Payment cannot be in form of work or services.
- Shares cannot be allotted until at least 25% of nominal value and entire premium has be paid up.
- Non cash consideration must be received within 5 years.
- Non cash consideration must be independently valued and reported on by a person qualified to be the companies auditor.
When must the allotment of shares be registered?
Within 2 months and a return must be delivered to registrar with a revised statement of capital.
What happens if a company doesn’t deliver their return and a revised statement of capital for the registrar after alloting shares?
Every officer of the company are punishable by fine.
What happens if a shareholder wants to sell their unlisted shares?
Seller holds shares on trust for the purchaser once an agreement is in place.
Seller then fills in a stock transfer form which needs to be registered within 2 months.
The company must also prepare a share certificate.
