Allotment of New Shares – ProcedureCompany Finance 1 – Notes
1. Directors Check Articles for Restriction of ‘Authorised Share Capital’
Pre -1 October 2009: companies required to have ‘authorised share capital’ (stated on Form
IN01 when incorporated) which was automatically transferred to the articles:
s28 remove or amend by OR rather than usual SR to amend articles (under the
transitional provisions in SI 2008/2860, Sch 2, para 42).
Post-1 October 2009: If company formed under CA 2006 but includes restriction on number
of shares it can issue in amended/bespoke articles (rare in practice):
SR to remove limit by changing the articles.
Model Articles: no restriction.
2. Director’s Authority to Allot Shares
Private company with one class of shares: s550 directors have authority to allot shares,
provided only one class and nothing to contrary in articles.
If pre-1 October company wants to make use of s550 power – pass OR, exists
permanently (Companies Act (Commencement No 8, Transitional Provisions and Savings)
Order 2008 (SI 2008/2860), Sch 2, para 43).
All other companies: Directors must be given authority to allot shares:
In articles – pass SR to change articles, or
OR or SH WR (ss549-551).
Must state number of shares directors authorised to allot, and period of time authority lasts
(max. 5 years). Can be renewed for further 5 years.
Authority can be revoked by SH OR at any time.
3. Statutory Pre-emption Rights
Check articles if pre-emption rights removed/applies to non-cash (no provision in MAs for
disapplication).
s561 shares being issued in exchange for cash only (s565) must first be offered to existing
SHs:
same amount of shares already owned,
offer open for 14 days,
Only if existing SH declines can they be offered elsewhere.
Disapplication in Private Company:
s569 - pass SR, or adding provision to articles to dis-apply pre-emption rights.
Advantage of changing articles: disapplication can be indefinite, usually used in small PCs.
s567 - including special article either generally or in relation to particular allotments.
s568 - pre-emption provisions in the articles will override s561, though notice under
s562 still applies unless excluded in articles.
s570 - passing SR where Ds authorised generally to allot shares under s551 – only lasts
as long as the s551 authority itself.
Disadvantage: not as advantageous as s569 option.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller msellex. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
