PROCEDURE PLAN
Allotment of shares:
Board meeting 1
Call MA 9: Any director or authorised company secretary can call
Apply to facts
Notice MA 9: Notice must be given to each director, wherever he is, and need not be in writing.
Contents must include MA9(2): Proposed date and time, location, how the directors will communicate if not
in same place.
The notice itself must be reasonable which is what is usual (Re Homer)
Apply to facts – if small company, what is usual is often same day
Interest s177: Interested directors must make a declaration
Apply to facts and look to exemptions – if directors already aware s177(6)(b)
MA14: Interested directors do not count in quorum nor can they vote
Apply to facts – even if didn’t make declaration won’t be able to count/vote - only for resolutions
they’re interested in
MA14(4)(b): permitted cause – buying shares in own company or its subsidiary
Quorum MA11: Any two of the directors
Is this going to be satisfied? Do we know who is attending?
Say we need at least X and Y – take into account interests – say bare minimum
Resolutions Directors do not always AUTOMATICALLY have authority to issue new shares. CHECK ARTICLES FOR ANY
CAP ON SHARES TO BE ISSUED. NO PROVISION IN THE ARTICLES OF ASSOCIATION (UNAMENDED).
s549: Two separate procedures to consider:
s550: Directors have authority – if only one class of shares (and issuing shares of that class);
nothing in articles to prevent; and private company. Would disapply under s.569.
s551: If company has multiple classes of shares Directors must be authorised by either OR or
provision in company’s articles. Authorisation must state:
- Maximum number of shares that may be allotted. Authority expires 5 years after OR (or
5 years after incorporation of company. S.551(3).
Failure to obtain authority does not invalidate allotment (s.549(6)) but director who does so knowingly will
commit an offence. (s. 549(4))
1. Directors alone SECTION 550
1 MA3: BR to resolve terms of allotment and allot the shares
SEE WS10 notes for more details
Pre-emption rights: see general rule s561(1) - this needs to be disapplied by SR (s569).
2 s302: BR to call a GM by BR or s291 BR to propose a written resolution
2. Need further authorisation SECTION 551
1 MA3: (overarching) BR to resolve terms of allotment – because need to show SHs what approval is for
that directors are seeking
Why they need shareholder approval?
SEE WS10 notes for more details
Authority No authority for shareholders to issue new shares – thus require OR (s551) -
Directors cannot automatically issue shares: Directors are not seeking yet to issue shares of
one class/company already has more than one –require authority.
Pre-emption rights: ‘Right of first refusal’ – Statutory rights on equity securities s561(1)
Equity Securities (s560(1)); ordinary shares or rights to subscribe, or convert securities
into, ordinary shares.
Ordinary shares defined as (s.560(1)): “shares other than shares that as respect to
dividends and capital carry a right to participate only up to specified amount” (e.g. non-
participating/fixed rate with no right to anything other than fixed rate/capital)
Ordinary shares: shares that entitle the holders to a share in the assets on a winding up.
1
, BLP WS10/11
How are they being paid for?
- Entirely cash consideration (s.561 applies) and existing SH have pre-emption rights.
- Wholly or partly non-cash consideration (s.561 does not apply – s.565) and existing
shareholders have no statutory right.
NOTE: There still may be special provisions dealing with pre-emption rights.
How to disapply?
1. Expressly excluded by the articles (s. 567(1))
2. Impliedly excluded by including a bespoke article conferring pre-emption rights on shareholders
(s.568) or;
3. Disapplied by s.569-570 (by SR)
- Company can entirely disapply (s.561) by providing special provision in its articles
(permanent).
- Pass a SR disapplying statutory rights to particular transaction. Or ask SH to sign a letter of
waiver.
Where Pre-emption Rights Apply, company must:
- Not offer new shares to potential SH unless it has offered them to existing SH (Ordinary
Shares) on terms at least as favourable (s.561(1)(a)
- Offered to existing SH in proportion to their shareholdings (s.561(1)(a)
- Offer communicated to SHs which must state a period of at least 14 days within which SHs
must reply (s.562(4) &(5))
If Preference Shares, then the company’s articles will need to be changed by SR. (S.561)
S.565 – Non-cash consideration for shares (like selling a warehouse), pre-emption would
not apply. Only offered are 100 ordinary shares.
4. s302: BR to call a GM by BR OR s291 BR to propose a written resolution
Voting MA7: Show of hands by simple majority – more than 50%
State how the decision would pass with what exact directors are needed
MA13: If deadlock, Chair can use their casting vote
Is there a chair? Remember that, practically, avoid doing this – too authoritative
Admin s248/MA15: Directors board minutes/written record of each BR must be kept for 10 years at
company’s registered office or SAIL.
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