Equity Finance - Allotment, Transfer and Transmission of Shares

Question 1

Allotment of shares?

Answer 1

Contract between company and new or existing shareholder in which the company issues new shares in return for a subscription payment

Question 2

Transfer of Shares?

Answer 2

Sale or gift of existing shares by a shareholder to another party. The company is not party unless the shares are treasury shares

Question 3

Private companies are prohibited from making an offer of shares to the public. Who does it exclude from ‘public’?

Answer 3

Existing shareholders, employees, or close associates.

Question 4

What is a a financial promotion under FSMA?

Answer 4

A communication that invites or induces someone to engage in investment activity.

Question 5

How are shares transferred?

Answer 5

By stock transfer form, signed by the transferor, submitted along with share certificate to the transferee, who presents it to the company

Question 6

When does beneficial ownership pass in a share transfer?

Answer 6

On execution of the stock transfer form

Question 7

When does legal title pass in a share transfer?

Answer 7

On registration in the company’s register of members, after which a new share certificate must be issued within 2 months

Question 8

When is stamp duty payable on share transfers?

Answer 8

Payable by the purchaser at 0.5% of the consideration (rounded up to the nearest £5), only if the sale price exceeds £1,000

Question 9

What is the minimum stamp duty payable on such transfers?

Answer 9

£5, if the consideration is greater than £1000

Question 10

Restrictions on share transfers?

Answer 10

Shareholders are free to transfer shares, subject to the Articles of Association

Question 11

What about refusal to register a transfer?

Answer 11

Directors may refuse to register a transfer and must return the investment of transfer with a notice of refusal, unless they suspect fraud.

Question 12

What is required if a transfer is refused?

Answer 12

Company must provide a statement of reasons for refusing to register the share transfer

Question 13

What are pre-emption rights on transfer?

Answer 13

Rights requiring a selling shareholder to offer shares to existing shareholders first, before selling to an outsider. These rights must be expressly stated in the Articles, as MA do not include them by default.

Question 14

What is transmission of shares?

Answer 14

Automatic vesting of shares in another person due to death or bankruptcy of a shareholder

Question 15

Who receives shares on death of a shareholder?

Answer 15

Shares pass to PRs

Question 16

Who receives shares if a shareholder is made bankrupt?

Answer 16

The shares vest automatically in the shareholder’s trustee in bankruptcy