Equity Finance

Question 1

Alloting Shares Procedure (broadly)

Answer 1

(1) CAP
(2) DIRECTORS’ AUTHORITY
(3) NEED TO DISAPPLY PRE-EMPTION RIGHTS?
(4) CREATING NEW CLASS?
(5) BOARD RESOLUTION TO ALLOT

Question 2

Alloting Shares Procedure - in detail

Answer 2

STEP 1: CAP

• is there a cap on the number of shares which can be issued?
• even for CA2006 company check no express cap in articles and previous resolutions.
• if there is a cap, remove by special resolution under s.21 CA

STEP 2: DIRECTORS’ AUTHORITY
- Do the directors need authority to allot the shares?
- s.549 - directors not to allot except under:
> s.550 - private company with one class
of shares, directors can allot, unless
expressly prohibited by articles.
> s.551 - companies with more than one
class of share, directors can allot only if
authority given by articles or resolution.
- Thus, need to check articles and resolutions - if there is no authority and more than one class of share, need to give authority by ORDINARY RESOLUTION.

STEP 3: DISAPPLY PRE-EMPTION RIGHTS?

• s.567 - have they been permanently excluded?
• s.560 - ‘equity securities’ (basically excludeds preference shares if not fully participating in capital and dividends)
• s.565 - for cash consideration?
• s.561 - MUST NOT allot without first offering to existing shareholders in equal proportions (provided above conditions are satisfied)

OR - DISAPPLY THEM
- s.570 (1) - where directors are generally authorised (by s.551), can do by:
> special resolution; or
> giving directors power under articles
This is NOT a permanent disapplication - attaches to a particular s.551 authority.

• s.569 (1) - private companies with only one class of share (s.550) - again, pre-emption rights can be disapplied by special resolution or by a provision in the articles.

STEP 4: NEW CLASS?
- If creating new class of shares, will need to amend articles to create specific class rights - by special resolution (s.21)

STEP 5: BOARD RESOLUTION TO ALLOT

Question 3

Post-meeting matters

Answer 3

• s.30 (1) file a copy of any special resolutions (e.g. amending articles) within 15 days of resolution being passed.
• s.26 (1) - file copy of thew new articles (if applicable) within 15 days of resolution being passed
• s.551 (9) and s.30 (1) - copy of ORDINARY resolution granting directors authority to allot, within 15 days of it being passed.
• s.555 (2) - file a return on allotment within one month of the allotment, together with a statement of capital - s.555 (3)(b)
• Update register of members
• s.769 - Issue share certificates (after an allotment)
• s.636 - Notice of new name given to new class + particulars within 1 month.

Question 4

Offering shares to the public…

(Remember FSMA provisions are about requirement for a prospectus,
CA provisions are about offering shares to the public when you’re not a plc!)

Answer 4

• s.85 FSMA - unlawful to offer transferable
  securities to public without prospectus
• s.86 FSMA - Exempt offers from public:
  > directed at qualified investors only
  > to less than 150 persons (!)
  > less than 100,000 EUR
• s.102B - defines ‘offer of transferable securities to the public’
• s.755 CA2006 - private company must not offer or allot shares to public
• s.756 CA2006 - defines ‘offer to public’ for CA purposes; exceptions in s.756 (3) - essentially, where it is of ‘private concern’ to the person receiving it / not calculated to result in shares becoming available to persons other than those who received the offer.