These are condensed, exam-ready and streamlined notes made from Classes, the Resource Pack and the Legacy Notes.
Public Companies is inherently content-heavy therefore these notes will help in streamlining the information you really need in readiness for exams.
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Secondary Issues
Covers all types of issuances of new shares by Cs already with Listed/Quoted Securities
Issuing Shares
Three important questions must consider to any issue of shares (in this order):
1. Limit on the Number of Shares – does the company have a limit in its articles of association on the number of shares that it
can issue?
2. Authority to Allot – do the directors have sufficient authority to allot the shares under s 551 of the CA 2006?
3. Pre-emption Rights – do the pre-emption rights under s 561 of the CA 2006 apply to the issue and, if so, does the company
need to disapply them?
Ratios – 1:4 rights issue means an existing investor can buy one extra share for every four shares already held by them
Calculation:
1. Issued Share Capital / [2nd no. in ratio] = No. of SHs able to buy [1st no. in ratio] shares = ‘x’
2. Multiply ‘x’ by [1st no. in ratio] = No. of New Extra Shares each SH above can buy = ‘y’
3. ‘y’ = £ of New Share Capital – made by the issue
4. Round Down – never round up
1. Limit on the Number of Shares
Cs formed before 1 October 2009 – memorandum of association (‘authorised share capital’)
o s.28 CA06 – automatically treats this as a restriction in the articles
Cs formed after 1 October 2009 – articles can place limit on no. of shares
Check Annual Return / Filing – if a limit exists and proposed issuance will exceed limit –
must remove or alter to permit issuance
Removing limit on Issues Share Capital
Special Limit in Memorandum (before 1 October 2009)
Resolution o Removed in 1 of 3 ways:
o Passing OR to remove the limit
o Passing SR to adopt new articles without a limit
o Passing SR amending articles authorising Ds to allot in excess of limit
Limit in Articles (after 1 October 2009)
o s.21 CA06 – SR can change articles
o Must be passed at GM
, o s.288 – WR procedure not available to Public Company
Notifying CH SR under s.29 – Admin Requirements:
o s.30(1) – Copy of SR & amended articles – sent to CH within 15 days of date of SR
o s.30(2) and (3) – failure to comply – C, and every officer in default, liable to a fine
Listing Rules – Continuing Obligations
o Premium Listed C – must publish circular – providing info on article change & issue of new securities (in.
arrangements for allotment)
o LR 13.2.1R – does not require FCA approval
o LR 13.8.10R – must include following info:
Explanation of effect of proposed amendments; and
Either – full terms of proposed amendments;
Or – statement that they will be available for inspection from circular date
o Circular must contain certain info relating to D’s authority to allot new securities and disapplication of
pre-emption rights
o LR 9.6.1R – Listed C must file 2 copies of all notices and circulars to the FCA
o LR 9.6.2R – Listed C must file 2 copies of all resolutions passed to the FCA
o LR 9.6.3R – Listed C must notify RIS of its submissions to FCA as soon as possible
o LR 9.6.4R(1) and LR 14.3.17R(1) – Listed C must notify RIS of any change to their capital structure
2. Authority to Allot
s.551 CA06 – applies to Public Companies
o Prohibits Ds from allotting ‘relevant securities’ unless authorised to do so by:
o Articles
o OR of SHs
CA 2006
“Shares” s.551 applies to:
o the allotment of any type of share (ordinary and preference) (s551(1)(a))
other than:
subscriber shares (s.559), and
shares allotted under an employee share scheme (see 13.9) (s.549(2)(a)); and
o the grant of any right to subscribe for, or convert to, any type of share (s551(1)(b)),
other than under an under an employee share scheme (s549(2)(b))
Authority also required for: convertible loan stock; options; and convertible preference shares
Check for Where to check:
existing o Both – Articles AND previous ORs for Ds to allot
, s.555 o Exceptional ORs here – requires filing with CH (s.551(9))
authority
What to look for:
o Date on which authority expires
o Maximum amount of securities capable of allotment
Expiry:
o If passed – new authority needed
o If not passed – how many shares already issued pursuant to that authority
o New authority required if maximum amount authorised already allotted
Obtaining a s.551(8) – provides option to renew, by OR, the original authority given either:
new s.551 o In Articles of association; or
authority o By OR
The s.551(2) – authority can be given for – particular exercise of power / for its exercise generally –
Authority / and may be – unconditional / subject to conditions
Resolution
s.551(3) – provides that authority must include:
o Maximum amount of shares capable of allotment under it
o The expiry date – cannot be more than 5 years from either:
o Date of incorporation (if within articles)
o Date of resolution giving authority
Notifying CH s.555 – Form SH01 – C must file Return of Allotment & Statement of Capital within 1 month to
CH
s.554 – Ds must register allotment as soon as practicable – but no later than 2 months
otherwise an offence is committed
s.551(9) – exceptional OR – must be filed at CH within 15 days of it being passed
Breach and s.549(6) – breach of s.551 does NOT invalidate the share allotment
Sanctions s.549(4) and (5) – any D who knowingly & wilfully contravenes / permits / authorises a
contravention of s.551 – liable to a fine
Why obtain Flexibility – don’t have to wait for notice periods of GM if wanting to act quickly
authority to Certainty – authority already obtained
allot shares Time & Cost Efficient – AGM is already held every year – don’t have to hold separate meetings
at AGM
rather than Limits on AGM Authority – might need to hold GM anyway if AGM doesn’t cover a particular
GM? matter that arises later on
Listing Rules
Authority to Listed C – must comply with Continuing Obligations re communications with SHs
Allot –
communication LR 13.8.1R – Premium Listed C must send out s.551 resolution to SHs – explanatory circular
to SHs and FCA (no FCA approval required – LR 13.2.1R) – must include:
(circular) o (a) – a statement of:
o Maximum amount of relevant securities Ds have authority to allot
o % representing total issued ordinary share capital – at latest practicable date
before circular’s publication
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