The Small Business Enterprise and Employment Act 2015 requires a company to write to bearer share warrant holders within one month of the commencement date of section 84 coming into force (comes into force 26 May 2015). How does the company know who the warrant holders are as the whole point of bearer shares is that the holder is unregistered?
If a company is restored to the register following dissolution by MVL, having had its share capital returned by distribution in specie (the value of the share capital having previously been lent to its shareholder) what is its share capital (given that it cannot be zero)?
Please assume a Form SHO1 (return of allotment) has been filed at Companies House, electronically, very recently. Please assume afterwards it was discovered that the Form indicates someone was allotted 5 ordinary shares, which is wrong, as he/she was only allotted 4 shares. Do you know how one corrects this problem e.g. perhaps by asking for the old SH01 to be removed, so a new one can be filed?
Is a shareholder still entitled to request information from a company (within the limits of the Companies Act or any relevant agreement) even after it ceases to be a shareholder? The information requested relates to the period while the ex-shareholder was still a shareholder.
A shareholder that is party to the shareholder's agreement is proposing to transfer his shares to a third party. This shareholder would like to pass on the benefit of rights in the shareholders agreement to the transferee. The Shareholder's Agreement permits this. Do existing shareholders have any say contrary to this action on the part of the departing shareholder?
I am acting for a client company who have a director shareholder leaving the company amicably under a settlement agreement prior to April 6th. Originally the shares he holds were to be the subject of a straightforward buyback. Now the company has said it wishes to "warehouse" the shares pending appointment of replacement(s). Do you have any practice notes or precedents that deal with this?
As you will know, currently shares bought back by a company under the cash de minimis exemption pursuant to section 692(1) CA 2006 can either be cancelled immediately or held in treasury. However, the Companies Act 2006 (Amendment of Part 18) Regulations are to take effect from 6 April 2015. One of the implications of this amendment is that section 724 (Treasury shares) will no longer be applicable to shares purchased by a company using the cash de minimis exemption, and instead, in accordance with section 706, the shares will be treated as cancelled. Do you have any thoughts on how shares purchased by a company pursuant to the cash de minimis exemption prior to 6 April, currently held in treasury, will be required to be treated from 6 April? Would the company have to cancel them? The legislation does not appear to address the point.
Where a shareholder creates a legal mortgage over shares in a company, the company notes the lender as holder of the shares on the register of members. Do you have a precedent for the wording of this note? Also is any stamp duty payable before the executed stock transfer form is completed?
I note from your practice note that the restrictions on companies purchasing their own shares only extends to limited companies. Is there any restriction on an unlimited company (having share capital) from purchasing its own shares? The articles of the unlimited company are silent in this regard and do not incorporate Table E. The unlimited company in question does not have any distributable profits.
We are using the written resolution procedure for all shareholders to approve a buy-back. One of the minority shareholders must have been allotted a share when he was a child - his parents co-own the share and hold it on trust for him. The position has never been changed, notwithstanding that the child is now an adult. Presumably, we still arrange for the parents to sign the written resolution as joint holders rather than the child as technically, they are still joint owners of that share? Do you agree?
A foreign parent company wishes for its English subsidiary to adopt an advisory board concept (an Austrian/German concept) with bye-laws governing how it is ran. I note that a lot of companies limited by guarantee have bye-laws which do not seem to have to be filed with Companies house. The company I am dealing with is a private limited company. As far as you are aware, is there anything to prevent a private limited adopting byelaws governing the running of a separate committee? Secondly, we were under the impression that the Articles should now just be in one document - how does this concept fit with byelaws which operate outside of the articles of association?
Can the waiver of a director's loan and reclassification as a capital contribution constitute distributable reserves? We have a subsidiary which had negative reserves. However, the sub had two outstanding directors' loans due to directors. Half of those loans were paid and the other half written off, thereby creating a surplus. Can that surplus be treated as distributable reserves (we are now looking to hive up assets a book value)?
The draft Companies Act 2006 (Amendment of Part 18) Regulations 2015 propose moving the de minimis exemption for share buy-backs currently found in section 621(b) of the Act to a new section 692(1ZA). These provisions need to be enabled ("if authorised to do so by its articles") and in many cases (including the BVCA model articles) articles have been adopted giving this buy-back authority by referring specifically to section 692(1)(b). What will be the effect of the change of numbering of the Act on the validity of any such authority in the articles?
Who is entitled to receive a dividend? We have a company whereby in the past four years dividends have been declared but not paid. The shares have been transferred, and my question is, is it the initial shareholder at the time the dividend was declared, or is it the shareholder currently holding the shares who is entitled to those dividends?
1. If you reduce share premium account, my understanding is that this creates reserves that you can do what you want with i.e. (a) can use to set off against a deficit in reserves, or (b) could use reserves created to then pay a dividend, but (c) you don’t have to pay such dividend to shareholders in the proportion in which they paid up the premium (or didn’t as the case may be), subject to anything prescriptive in the Articles. Do you agree? 2. In an extreme scenario, if, out of a Company’s issued share capital of 100 shares of £1 each, A held 75 and B 25, subject to anything in the Articles or general minority protection, is there anything to stop A orchestrating a reduction of capital of B’s 25 shares, passing a shareholder resolution, it’s on-side directors signing a solvency statement, all 25 of B’s shares being cancelled to create reserves and then immediately thereafter or sometime later, A (now being the sole shareholder) paying itself a dividend of the full £25 of B’s cancelled shares?
We wish to use PLC's standard articles 8-385-5275 for a company incorporated under the Companies Act 1985 which wishes to update its articles in line with the Companies Act 2006. However, the transitional provisions mean that the 1985 Act companies will not be able to rely on section 550 CA 2006 unless express provision is included. The precedent articles do not contain such an express provision. Do you have a summary of provisions under CA06 which, under the transitional provisions, do not apply automatically to companies incorporated under CA85 and which will therefore need to be incorporated expressly?
Section 696(2) of the CA 2006 appears to envisage that the contract for an off market purchase of shares requiring approval on an off market share purchase does not need to be in writing (hence the need for a memorandum of its terms). If there is a default provision in the Articles of Association for a shareholder who ceases to be a "member" of a private company whereby under the rules of the association they are required on their cesser as a member to transfer their shares to a nominee elected by the board (there is nothing stopping this being the Company itself and the shares being held in treasury from what I can see), and there is a provision in the Articles that if they fail to do so, allowing a director to sign the instrument of transfer on their behalf) - could this be considered a contract not in writing? There will not be a specific off market purchase agreement if these default provisions are evoked, but the Company would like to buy back the shares and hold them in treasury for new members who join in the future.
Section 829 Companies Act 2006 defines a distribution as having to be made to a company's members. Is it therefore possible to declare a dividend on a given date ("Declaration Date") by reference to a "record date" that pre-dates the Declaration Date - which could give effect to a distribution being made to a person who is no longer a member of the company (that person having been a member on the record date but not on the Declaration Date)? Many thanks.
In a reply to a question about dividends in specie on 28/11/2013 you point out that dividends in specie can be one of two forms as follows: 1. The distributing company declares a dividend of a specified cash amount (equal to the book value of the asset to be transferred) and that dividend is satisfied by the transfer of the relevant asset. 2. The distributing company simply distributes the asset in specie to members without first declaring a dividend of a specified cash amount. Do you consider that article 34 of the Model Articles authorises either method or only the first method (my reading suggests only the first method)?
Say a 'company' enters into an agreement before it is incorporated. Specifically, the name on the contract is that of the company, but it is another 4 days after the contract is signed before that company actually comes into existence. Since the contract was signed (and the company incorporated), both parties to the contract have adhered to their obligations. Should the new company wish to leave the contract (with no relevant termination provisions in the contract) is there any stock to be placed in the fact that the contract was signed prior to incorporation? My gut instinct is that the performance of the contract and the intention of the parties will mean that the agreement is binding, but does the fact it was signed before incorporation make it null and void?
In your practice note on Share buybacks: private companies, you refer to the case of BDG Roof-Bond Ltd v Douglas where it was suggested that payment for the purchase of shares under a buyback could include the transfer of a non-cash asset or set-off against a liability. The note goes on to say that despite some practitioners agreeing with this, there are still concerns about the comments made by Park J in that case and the most prudent course would be for all payments for repurchased shares to be in cash. Do you have any more information on who has expressed concerns about Park J's comments? I appreciate that standard practice has been to pay for repurchased shares in cash, but the CA 2006 does not expressly make this a requirement and the only case that seems to refer to this point (i.e. the BDG Roof-Bond case) suggests that payment in kind is acceptable. Palmers Company Law also states that payment in kind is acceptable (and refers to the BDG Roof-Bond case.)
If a company wishes to issue shares to an "employee shareholder" via a capitalisation of profits, does the company just need to capitalise the nominal value of the shares to be allotted (e.g. £100 for 100 shares of £1 each) or does the company have to capitalise the market value of the shares concerned and issue such shares as fully paid and with a premium in respect of the excess over the market value? For example, if the 100 shares were worth say £3,000 then the question is whether they can be capitalised at £100 (nominal value) or £3,000 (market value) where they would be fully paid with a premium of £29 per share.
Can a shareholder with a minority shareholding in a private limited company who believes that the statutory accounts prepared by the Accountants are erroneous require his queries to be raised with the auditors where they intimate that they cannot respond to him without permission of the Directors and the Directors refuse to take up his queries.
Can the members of a Company Limited by Guarantee (which is also a charity) propose resolutions to be passed at a scheduled AGM? The Articles of Association do not allow for this but the Charity Commission guidance appears to suggest that it is good practice to include an invitation to propose resolutions and request nominations in the AGM notice.
We wanted to ensure that our articles of association cover authority for the Company to act as Executors, Trustees and Attorney as we are moving away from personal appointments. We currently have articles of association in pretty much standard form A. We want to pass a special resolution if this is necessary to cover the above points. Have you any suggestions?
To what extent, if at all, can a company exclude the company secretary from attending a General Meeting of the Company? Or to flip it around, what right does the company secretary have to attend? I don't believe a company secretary has the right to attend, but all resources seem to cover members and directors and just assume the company secretary would be there in an organisation/minute-taking capacity.
A company has an accounting reference period of June. The previous accounting period therefore ends June 2014 with those accounts due to be submitted March 2015 - so the accounts for the Previous Accounting Reference Period are not yet overdue. The Company wishes to shorten its Previous Accounting Period to 31 December 2013. If it does this, the accounts for the shortened 6 month accounting period will be overdue. Does s392(1)(d) Companies Act 2006 prevent the Company from shortening the Previous Accounting Period in this way?
In relation to a share pledge, should a shares administrator refuse to place a beneficial owner to shares, on the register of members what are the implications? And is there anyway of enforcing this without litigation?
The directors of companies limited by guarantee have a duty to promote the objects and purposes of the company. What (if any) consideration must the members have for the objects when exercising their voting rights? And do they owe any duty to the company? It seems strange that they should be able to vote with the same self-interest as a normal shareholder might; especially if the company were to have charitable objects or purposes.
We have been supplied with proposed amendments to a Company's Articles which contain the following wording: “Subject to the provisions of the Act, following a disposal of the Company’s business and assets, the directors or liquidator shall hold a General Meeting at which they shall request that the Members sanction by Ordinary Resolution the use of the net proceeds of sale for either of the following purposes: (a) the winding up of the Company and the distribution by the directors or liquidator, as the case may be, of the whole of the surplus assets to [NAMED INDIVIDUALS]" (b) [STARTING A SPECIFIED NEW BUSINESS UNSING THE SALE PROCEEDA AS CAPITAL] The point has been raised that (a) refers to the winding up of the Company which requires a Special Resolution whereas the wording of the Article says that the Members must decide by Ordinary Resolution. The opening sentence states that the provisions of the Article are "subject to the Act". In this instance would a simple majority of the members be enough to allow for the distribution of the surplus assets to the named individuals but, unless 75% of the Members were in favour, no winding up could take place?
We are advising on a merger of two subsidiaries of a parent company. My query relates to a change of name on completion. In short ‘S Ltd’ is being purchased by ‘S S Ltd’. However, on completion ‘S S Ltd’ wants to change its name to ‘S Ltd’. I’m trying to establish the process for doing this swap of names – are you able to assist please?
With regard to cumulative preference shares, from reading the practice note, I appreciate that any amount which is not paid accumulates as a debt owed to the shareholder. However, there is no absolute right to be paid until the company has sufficient distributable reserves and a dividend is declared by the directors. With these two principles in mind, do you have any thoughts on a position where there are arrears of cumulative preference dividends on shares which may be reclassified? In brief, does the debt owing remain with the shareholder notwithstanding that the rights attaching to the shares may have been varied? The issue which I have in mind is that the debt does not become payable until the dividend is declared by the directors, however, if that share class ceases to exist, then the directors will never be in a position to declare the dividend. I note that it is not possible to convert redeemable shares to non-redeemable shares (and vice versa). I appreciate that this is an unusual situation, but would be grateful for your thoughts. Many thanks.
Does the issue of a golden share containing rights to a first capital distribution priority dividend and enhanced voting rights to prevent a variation of the rights attaching to the golden share constitute a change of control?
Does an Annual Return for a private limited company ("the Latest Annual Return") need to show details of individuals who, on the date of the previous annual return were not shareholders but subsequently acquired shares (for a brief period), and sold them again prior to the date of the Latest Annual Return such that by that date they were no longer shareholders?
Can directors use the language of "declaring a dividend" rather than "paying a dividend" without having shareholders' approval? If the directors can, by board resolution, "declare" a dividend, rather than "propose" a dividend does this create a debt?
If a company gives notice of an AGM and sets out a special resolution to adopt new articles of association 'as tabled at the meeting' do the new draft articles need to be sent out with the notice? This would seem best practice, but if the directors would prefer to discuss the proposed amendments only at the meeting rather than circulate them in advance (to avoid issues with potential vexatious actions of certain shareholders in advance) would this invalidate the resolution under section 283 or 311 CA06? Thanks.
In the event that a company is seeking to adopt new articles and remove its memorandum, are the new articles effective immediately following the resolution being passed notwithstanding that the removal of the memorandum only takes effect once the CC04 is filed with Companies House?
A client entered into an agreement with another company under which, in return for shares in our client's company, the other would engage our client and refer business to him. Financial targets were agreed over a 3 year period. Against our advice our client agreed to transfer shares equivalent to 35% on completion. Six months in the other party has failed to pay invoices and hit agreed targets, and the relationship has broken down. The parties have agreed to terminate and all shares issued to the other party plus a payment are to come our client's way in full and final settlement. My question is in relation to the shares. Our client is a company with, save for the other party to this arrangement, only one shareholder. The obvious options appear to be a share transfer to the individual behind our client (straightforward although would leave him with an unusual number of shares) or a company buyback and cancellation (this would require more work to check the Articles, produce a contract for shareholder approval and so on). Is it possible for a company in this situation to simply cancel shares which have been issued or can that only be done within the context of a buyback arrangement?
We are dealing with a share buyback, where the Seller and Company enter a buyback agreement and the Company buys the share back “for a consideration of £1”. The Seller wishes to have no risk or cost associated with this, so the buyback agreement also states that the Company will indemnify the Seller against any liabilities the Seller has as a result of the transaction, including tax. The indemnity does not cover the Sellers obligations and liabilities under the buyback agreement itself. In the buyback agreement, the Company also acknowledges it has no claims against the Seller and waives any claims it may have, releasing and discharging the Seller from any liabilities in respect of those claims. Again, this does not cover the Sellers obligations and liabilities under the buyback agreement itself. The Further Assurance clause states that the Company will pay the Seller’s costs for any subsequent actions requested by the Company in respect of the buyback. The Company is also paying the Sellers legal costs for negotiating and entering into the buyback agreement, though this is not stated in the buyback agreement itself. We have taken the view that these additional payments and indemnities/ waivers over and above the express £1 consideration do not fall within the scope of s691(2). As a result, they do not need to be paid at completion of the purchase or funded out of distributable reserves. Whilst they are arguably elements of the overall consideration for the
With regard to share rights, and in particular section 692 of the Companies Act 2006, would you be able to give your views on when shares will be deemed to constitute the same class. It is common for private companies to include alphabet shares which are expressed to rank 'pari passu in all respects save as to dividends'. Dividends are then typically at the discretion of the board in respect of each class. Do you think that such shares could be deemed to be of one class and, if so, what are the likely Company Law implications? I note that section 629(2) may (by inference) be of relevance on the basis that it provides that shares will not be of different classes by reason only of being entitled to different dividends in the first twelve months (the inference drawn being that discretionary dividend entitlements which extent beyond twelve months will prevent the shares from being deemed to be the same class). Again, I would welcome your views on this suggestion. Lastly (subject to your views on the above), I have seen the suggestion that the capital rights attaching to alphabet shares should be varied so as to differentiate the classes. For example, on a winding up, A shares being entitled to the first £100, B shares the next £100 etc with all classes ranking pari passu after the initial 'preference phase'. Subject to your views on the above, is this sort of variation of share rights likely to be effective? Many thanks.
Would it be Unfair Prejudice if a Private Limited Company offered to buy back shares from shareholders who owned less than 1,000 shares only (and where there are shareholders who own more than 1,000 shares who do not receive such an offer)? I am essentially trying to discover if an Unfair Prejudice Petition could be founded on this basis. I believe it would be feasible as such an offer could be interpreted as conduct prejudicial to certain members' interest as members. However I am trying to determine if there is any case law to support this and if a court would be likely to view this as a viable basis for the petition.
I act for the minority shareholder of UK Ltd co who currently holds 30% of the ordinary share capital but majority shareholder is trying to dilute the shareholding so minority person is left holding only 1%. Is there any way to stop this?
I am trying to understand what use can be made of a merger reserve which arose when making an acquisition using shares. Tolley's Company Law says that a merger reserve is "a capital reserve ... available for a wider range of purposes than a share premium account and, in particular, goodwill arising on consolidation can be eliminated..." We don't want to use the reserve to eliminate goodwill, but Tolley's (nor anything else I can find) does not elaborate on the other potential uses of a merger reserve. Following on from this, our Articles say that shareholder approval is required for "to reduce any capital redemption reserve and any share premium account." Would a merger reserve be regarded as a capital redemption reserve or share premium account?
S.292 of the Companies Act 2006 gives the members the power to require the company to circulate a written resolution for approval by the company's members. If the company has only one member, can that one member benefit from this section? The section refers to "members" (i.e. plural), although it does state under subsection 4 that the "company is required to circulate the resolution... once it receives requests to do so from members representing not less than the requisite percentage of the total voting rights", such percentage being 5%. Clearly, a sole member would satisfy this percentage. Is there any reason why a sole member should not be able to rely on s.292? Thanks for your assistance.
Please can you advise whether a CIO has any requirement to provide certain information on business stationary equivalent to that expected of a charitable company under The Companies (Trading Disclosure) Regulations 2008?
Following on from previous questions concerning multiple completions on share buybacks with the beneficial and legal title to the shares being split, are you aware of whether this structure has been approved from a corporate law perspective (eg. by counsel's opinion)? I am aware that the structure appears to have been approved by HMRC in clearance applications and has been the subject of articles in Taxation (see "Multiple Attraction" and "Buyback Mountain") but am still concerned that, where all the beneficial interests in the shares are acquired on exchange and the legal title is then acquired in instalments, a court may look at the transaction as a whole and decide that it breaches the prohibition on payment in instalments under section 691(2) CA2006. The structure is one that is being increasingly proposed by accountants (relying on an ICAEW technical release, previous HMRC clearances and the Taxation articles (amongst other things)) but have the corporate law aspects ever been properly considered?
We have a private company which is a joint venture with A shares and B shares. The company is considering purchasing some (say 5%) of the A shares out of distributable profits. What will happen to the A shares after they are purchased by the company and cancelled? Will the cash equivalent of the nominal value of the cancelled shares be returned to the A shareholder? Our accountant says that the shares purchased are put in a capital redemption reserve which is non-distributable. If so, how do we return the cash to the A shareholder?
Where a company, which has more than one shareholder, reduces its share capital, is the reduction applied pro rata amongst the shareholders? If so, where is the authority for this? Can the allocation be other than pro rata if the shareholders consent?
A grandparent is setting up a new limited company & wants to issue shares to grandchildren who are minors. Between them, the grandchildren will hold more than 50% of the voting rights. It is proposed that the parents of the grandchildren will act as nominees. The grandparent does not wish to lose voting control. Can the parents of the grandchildren make a nomination of the voting rights under s145 CA 2006 back to the grandparent?
In relation to the paragraph ‘Meaning of ordinary shares’ can you please tell me whether or not you would regard non-voting shares as being ordinary shares? In other words, would a shareholder holding non-voting shares have pre-emption rights for the allotment of shares?
If an unlisted plc contracts with a third party for the third party to provide services in consideration of a cash payment, the third party provides the services and renders an invoice which the company is unable pay, is any subsequent agreement made between the company and the third party to settle the third party debt by the allotment and issue to the third party of new shares in the company a transaction for cash or a transaction for non-cash consideration requiring an independent valuation etc. pursuant to section 593 Companies Act 2006?
Where a company, incorporated in 2013, has bespoke articles of association which make no reference to the CA 2006 model articles (either expressly excluding or including them), will the model articles still apply where provisions are not dealt with in the bespoke articles? Is it the case that the model articles would be deemed excluded, or would it be implied that they would apply where the articles are silent on a subject?
I am acting for a Company limited by guarantee to assist them in reviewing their Articles. An issue has emerged over their membership. They say the vast majority of their members are either Clubs which are corporate bodies or other unincorporated associations/clubs and they have very few individual members. I have pointed out that an unincorporated association/club is not a legal person so an unincorporated body cannot itself be a member of the company, although an individual representing such a body could be a member of the Company. Do you agree with that assessment as I see nothing in the Companies Act 2006 allowing unincorporated bodies to be members of a Company limited by guarantee?
The executors of a deceased shareholder's estate (the transmittees) are not entitled to vote under the articles of association of the company. The directors of the company wish to circulate a written resolution to the members. Do the deceased's shares qualify as eligible for the purposes of circulating the written resolution? If so, is it correct that the executors could not vote and would be deemed to have voted against the resolution?
We act for a company which wishes to transfer part of its business intra group by way of dividend in specie to its parent. The business includes assets with a book value of £2million, and liabilities of £1,999,995, leaving a net transfer of £500. In determining the value of the assets for the purpose of determining whether the company has sufficient distributable reserves, can we look at the net value of £500, or will the company need reserves of £2 million? I have read the practice notes on dividends, distributions and intra group transfers but cannot find any guidance on the net value of a bundle of assets and liabilities. Does this mean that each asset needs to be valued separately, ignoring any liabilities transferred simultaneously?
I need to use the non court application procedure to reduce of capital under Companies Act 2006. All shares are no redeemable. Can I achieve this by reducing capital to one one pound share and then simply use the voluntary strike off procedure to remove the company from the register. I understand it is not possible to reduce capital to zero using the non court application reduction procedure
Would the discharge by a subsidiary of a parent's debt to a third party be considered a deemed distribution to the parent, such that the Part 23 of the Companies Act 2006 would need to be met by such subsidiary in respect of the payment being made?
Does the surrender of losses to a JV's corporate shareholder for consortium relief where it has been agreed that the losses will be surrendered by the JV for nil consideration, count as a distribution, thereby requiring the surrendering JV to have sufficient distributable profits to justify the surrender? If so, how is the value of the surrendered losses - and therefore the requirement for distributable profits - calculated? Can we deal with this by recording in the JV agreement that the shareholder has, in part, been induced to enter into the JV and subscribe for shares in consideration for the surrender of losses at nil, so that value has been given by the JV shareholder for the surrender? Do you have any suitable wording?
I have a question regarding Community Interest Companies (CIC): are there statutory restrictions on the identity of the shareholders of a CIC? In other words, is there a rule which says that only the directors of a CIC can be its shareholders? I had a look at your practice note on CICs and it is my understanding that anyone can be a shareholder in a CIC (subject to what the Articles provide). Many thanks for your help.
We have a client where there are two shareholders. One of the shareholders has died and their shares are within their estate. There has been a dividend declared and the company has been sending cheques to the trustee of the estate for the monies to be claimed by them. All of the cheques has been uncashed. The company is now going to be put into a members voluntary liquidation. How long do the trustees of the estate have to claim their dividends? Do they lose the right to the dividend after a period of time?
Must a chairman at the AGM of a public company recite each resolution word for word before putting it to the vote or is it acceptable, particularly with the lengthier resolutions, to paraphrase and refer shareholders to the full text of the resolution as set out on the poll card?
We act for a private limited company that was incorporated under the Companies Act 1985. There is nothing in the company's Articles of Association about sending documents electronically and the consent of individual shareholders has not been obtained to do so. It is now proposed to obtain such consent (along the lines of your precedent document - 'Request Letter for Electronic and Website Communication'). In this precedent letter there is reference to a shareholders' resolution also needing to be passed in order to amend the Articles of Association to permit such forms of communication. Please can you confirm whether this is necessary in addition to obtaining shareholder consent in the form of the letter itself? The company we are acting for has some 450 shareholders and it may therefore be problematic to get this resolution passed within 28 days of circulation. Many thanks.
A client has issued unpaid shares and so has a call over the shares. Can the call be satisfied by subsequent services provided by the shareholder to the company? Can the company waive the call over the premium element of the unpaid share (i.e. demand the nominal value be paid only) If the above is possible how is it recorded at Companies House? How is the SH01 filed stating unpaid shares amended?
When a company is circulating a written resolution to its members, is it the members who are members at the time the board resolution is passed to make the decision to send out a written resolution that are entitled to receive and vote on the resolution, or, if the written resolution is not immediately circulated, is it the members who are members on the circulation date?
The article seems to say a private company can hold its own shares if a shareholder gifts them to the company - but is that correct? Is not the whole point that the company is a separate legal entity? What happens to the shares in a private company? A listed company does not need to cancel shares but can hold them in treasury - when they do this the shares are in effect suspended. It does not seem right that the buy back rules can be avoided by the gifting of shares and then the company owning shares in itself with the ability to transfer shares. Could you please clarify your view here?
My question relates to the best course of action to take where original signature pages (of a shareholder resolution approving the resignation and appointment of directors) have been destroyed. In the past, shareholder resolutions of the Company have been signed in hard copy, scanned, then sent by email to the shareholders. One shareholder is now requesting the hard-copy originals for its records. These have been destroyed (although a scanned copy remains). What is the general procedure in such situations? Should the resolutions be re-executed in hard-copy? (In which case, how would this affect the resignations/appointments? Presumably this is an evidential matter that would not affect the date of the resolutions coming into effect). Or should one argue that the shareholder should be content with the electronic copy since it would be admissible in court as evidence?
Is there anything you can think of that would prevent a company having a provision within it Articles of Association that provides that where anything under the CA2006 requires an ordinary resolution then such ordinary resolution would only be effective is passed by shareholders holding (e.g.) 55% of the shares/voting rights instead of the default simple majority?
I have a company which currently has 4 classes of shares: A Shares, B Shares, C Shares and D Shares. The shares rank pari passu except for the D Shares which has a provision in the Articles that the holder of the majority of the D Shares can appoint the Chairman of the board of directors. The only shares currently in issue are 10 A Shares. The company wishes to: 1. adopt new articles with only one share class - Ordinary Shares. The New articles will be the same form as the previous ones - but will simply refer to Ordinary Shares. The only significant point is that there will now be a provision that the holder of the majority of the Ordinary Shares can appoint the Chairman of the board of Directors. 2. redesignate the issued A Shares as Ordinary Shares. I am planning on effecting this by a board minute and written resolution. The written resolution will contain a special resolution to adopt the new articles and a ordinary resolution redesignating the shares. I am then planning on filing an SH08. My questions are: 1. Does the company also need ask the A shareholder to sign a class consent (even though they are the only shares in issue and they will be signing the special resolution)? 2. Does the company also need to file a SH10 or SH11 or SH12? 3. Are there any issues with removing the B, C and D Share classes? - even though there are no such shares in issue. (My concern is that we are amending the A Shares to Ordinary Shares, and whether the right of the holder of t
I am doing a share premium account reduction for a private limited company (Company A). Shortly after the reduction, the plan is to hive up the business and assets and liabilities of Company A to Top Co. A point has been raised re the Solvency Statement to be given by the directors of Company A and whether the directors can actually give it knowing that the liabilities/debts of Company A will be hived up to Top Co and thus will become Top Co's responsibility - they may not be paid or otherwise discharged by Top Co for example.. We would be using Solvency Statement version one on PLC as there is no plan, as far as we are aware, to wind up Company A. Just wondered what your thoughts were on that. The board minute of Company A narrates the planned intention to hive up and the Solvency Statement is considered in light of that as well as based on the other usual financial info for Company A such as accounts, management accounts etc. Thanks
Section 899 Companies Act 2006 states that the scheme needs to be approved by a majority in number representing 75% in value of members or class of members. What does "value" mean for this purpose? Is it nominal value, or voting rights attached to the shares? (Your practice note advises a poll because of the value element, which suggests voting rights are relevant.) There doesn't appear to be any definitive authority. By analogy, the Insolvency Rules 1986 state, in 1.20, that the value of members is determined by reference to the number of votes conferred on each member by the company's articles. Is that the correct approach here?
Where a company is undertaking a reduction of capital and is extinguishing its share premium account, should the proceeds of the share premium account be repaid to the shareholders on a pro rata basis depending on the number of shares in the capital of the company held at the time of the reduction (in the same way as the share capital account), or should it be repaid on the basis of the premium each shareholder paid on his or her shares?
In connection with a purchase by a company of its own shares, could the seller of those shares take security from the buying company so that, if the shares were not purchased as per the agreement, the security could be enforced?
Will a not for profit sporting organisation (a golf club) fall into the first condition of regulation 3, part 2 of The Company and Business Names (Miscellaneous Provisions) Regulations 2009? The exemption from requirement as to the use of "limited" in the Company name states that the objects of the company must be for either the promotion or regulation of commerce, art, science, education, religion, charity, or any profession, and anything incidental or conductive to any of those objects. I am surprised that sport is not listed here. Do you think a golf club could fall under one of the above categories?
In relation to the register of members, are corporate shareholders required to give their registered office or principal office address details for the purposes of s.113(2)(a)? I note that for corporate directors, pursuant to s.164(b) the registered or principal office address must be given in the register of directors. What is the position for the purposes of the register of members? Could a different address, not being the registered office or principal office of the corporate shareholder, be provided?
A company is granting employee share options that fall within the company law definition of an employee share scheme. The company's articles contain pre-emption provisions that override the statutory pre-emption provisions (i.e. you have to offer the shares to different groups in priority to other groups). Do we need shareholder approval to specifically disapply the pre-emption provisions in the articles because the statutory exemption is not relevant here? Thank you!
We have a situation where a limited company with 3 shareholders has come to us. All shareholders agree that in 2005 (when there were only 2 shareholders) the intention was that the new shareholder would receive as a gift, 20% of the shares in the company for nil consideration. For reasons unknown to the shareholders, the company accountant at the time allotted 125,250 shares of £1 to the new shareholder and recorded on Form 88(2) and in the accounts since that these shares were unpaid and so a debt due to the company for the nominal value of the shares. Although the number of shares reflects ownership of 20% in the Company, it shows that the new shareholder owes the company £125,250, which was not the intention of the parties at the time. What is the best way/how is it best to resolve this situation?
My query is in relation to the termination of a company secretary. If a private limited company wishes to terminate the appointment of its company secretary, whether that be corporate or an individual, does it need to provide formal written notice of its intention to do so to the company secretary before preparing the paperwork necessary for the Board and Companies House in relation to the removal of the company secretary? There is no requirement to do so under the Company's Articles of Association.
What is required, under s.30 CA 2006, to be filed at Companies House where a special resolution is passed at a meeting rather than by written resolution? I am wondering what constitutes a "Written memorandum setting out its terms"? Do minutes of the meeting suffice - if they entail the wording of the special resolution? The context is a company limited by guarantee which is having an extraordinary general meeting to adopt new articles of association. Notice has been sent out within the proper notice periods containing the wording of the special resolution to adopt the articles.
Have you got any wording for deed of indemnity for a lost share certificate that would be appropriate where the holder of the lost certificate is now in administration? I.e., wording that would be suitable for an administrator to agree to.
If a company has more than one shareholder and the articles state that the quorum is 2 shareholders (or proxies or representatives) then a meeting where one shareholder attends who also holds the proxy for a second shareholder is not quorate as it would need two people to be physically present? If a company has more than one shareholder and the articles state that the quorum is 2 shareholders (or proxies or representatives) then a meeting where one shareholder attends who also holds the proxy for a second shareholder is not quorate as it would need two people to be physically present?
Am I right in my understanding that the Articles can set out a different requirement for the variation of class rights to the CA2006 default position? For example could a set of articles allow class rights to be varied by a special resolution of all the shareholders (and not just a special resolution of the class concerned), even where the voting rights attached to the class concerned equate to significantly less than 25% (i.e. the holders of the shares of the relevant class would not be able to block the resolution varying the rights attached to their shares)? I appreciate that sections 994, 663 and 664 would still be available to the holders of the class having its rights varied.
I have a query in relation to Special Resolutions of a company. What specific boxes must a resolution tick before it is designated as a special resolution? Would a resolution in which the members voted to dispose of an asset be a special resolution? In these circumstances would Companies House need to be notified? Any help would be appreciated.
We are a private company with around 60 shareholders. One of these is a nominee company who has expressed an interest in selling their shares. We would like to know who is 'behind' the nominee shareholder - i.e. the beneficial owner. However, I note that section 793 of the Companies Act authorises public companies to enquire of the beneficial ownership details from nominee shareholders, but this provision does not seem to extend to private companies. Is this correct? If so how can we require the nominee to reveal the beneficial owner's identity?
Under s899 Company Act 2006, a majority number representing 75% can agree an arrangement. Voting can be done by proxy. If we have 100 shareholders and 50 shareholders decide to vote by proxy through the Chairman, is the Chairman's vote counted as 50 votes, or as 1 vote? I am asking in case only 2 shareholders turn up for the meeting and one is against the arrangement. Is there any guidance for this?
Company A wants to make a dividend payment to its sole shareholder, Company B. It is unable to do this due to a lack of distributable reserves so arranges a reduction of capital. Company B will pay the dividend it receives to its own sole shareholder and overall group parent, Company C. Is it possible for Company A to make a direct transfer to Company C, following the reduction in capital? The Board of Company B is willing to authorise this. Companies A and B are both incorporated within Europe. Company C is Japanese. Does this complicate the intra-group transfer of cash in any way?
Can a company, which is in Administration, effect a Capital Reduction (using a solvency statement, rather than asking the Court) whilst it is in Administration on the assumption that following a period of trading it is now a solvent company. If so, what role would the Administrator play in the process? Many thanks.
Following on from this query:General meeting: can a single member company host a general meeting by way of telephone conference in order to remove a director under the section 168 procedure? Where the Articles of a company exclude the Model Articles and there is no express provision for meetings to be held by electronic means, will it be necessary to follow Byng - i.e. to ensure that all participants can both see and hear each other?
My client filed some incorrect annual returns last year for a number of companies. They stated the total amount paid up on share capital was £nil, which is incorrect. They are starting to file the next set of returns for some of these companies (correctly). Do they have to resubmit correct returns, or can they rely on the fact they are now issuing returns correctly? Thank you.
Under the Return of Surplus paragraph in the article on Reduction of Capital, it states that "a reduction of capital under Section 641(4) will involve a direct payment to shareholders and will not involve the creation of a reserve." Is there any case law to support this? And in specifically what circumstances can a reserve account be avoided? Does this only occur when a company does not have any accumulated losses that can be offset by the creation of a reserve? Thanks
I am setting up a user led charity for disabled people as a company limited by guarantee for a client. They want to make sure that all members are disabled persons but would like to be able to appoint non-disabled directors to the board of the company to help with administrative matters. Is it possible to appoint a director to the company limited by guarantee when they are not a member?
Is it possible to include a shareholder being served with divorce proceedings as an event which triggers a compulsory transfer back to a majority shareholder and/or the Company in the Company's articles? We act for a sole shareholder who is making a gift of a minority of shares in her company (where she is the sole shareholder and director) to her sons, who are both married. Having been through a messy divorce herself, she would like to include a provision in the articles that, if either of her sons are served with divorce proceedings, then the shares will automatically transfer back to her or the Company.
There are two aspects to this question. First is the extent to which the preference shares described below are debt rather than equity. The second is whether, having established that the shares in question are "debt" they can be converted to ordinary shares in a debt/equity swap. This concerns a private limited company with two classes of preference shares. The A prefs bear annual interest at 5% and are redeemable on a fixed date. Interest on the A prefs is payable in preference to any redemption payment on the B prefs. The B prefs are non interest-bearing and are redeemable by instalments on fixed dates. On a liquidation, capital reduction etc.: • B prefs have preference over the A prefs; • A prefs are next in line for both repayment plus interest; • thereafter the A prefs, B prefs and the ordinary shares are paid pro rata as if they constituted one class. The preferences shares are beyond their redemption date and the Company is not in a position to redeem them. The Company wishes to restructure its share capital by converting the preference shares to ordinary shares and the preference shareholders are willing to agree to this. Can the proposed restructuring be dealt with as a debt/equity swap?
I am looking at a scenario whereby three companies are in a vertical line, Parent, Subsidiary and Bottomco. Parent owes Bottomco a debt, which is to be assumed by Subsidiary. Subsidiary has no distributable reserves and will be assuming the debt for £1 consideration. Does this amount to a distribution? The debt is considerably more than £1.
As part of a reorganisation and demerger I need to hive up to a parent company assets and liabilities with a net asset book value of £447,255. The distributing company has distributable reserves of £430,536. It is not possible to identify and separately transfer by way of sale any specific assets whose book value equates to the difference between the net book value and the distributable reserves. I am proposing that the two companies enter into a distribution agreement which will provide that the transfer of net assets is by way of a distribution in specie to the value of £430,536 with a balancing payment of £16,719 to be paid by the transferee by way of consideration and to be left outstanding as an inter-company debt. Does this work within the rules relating to distributions generally and distributions in specie in particular?
If a limited company changes its registered address will it need to inform every third party that it has contracted with that the old address for serving a valid notice under their agreement has changed? Further does a letter going out to the suppliers need to be worded as a variation to the existing agreement i.e. in accordance with the relevant variation clause within the agreement?
I note in your disclosure letter you only refer to "disclosed" in lower case rather than rely on the definition of "Disclosed" from the SPA. Please explain the rationale for not using the defined term for "Disclosed" in the Disclosure Letter and what the implications of using either a defined term (i.e. "Disclosed") v. not a defined term (i.e. "disclosed") are in a Disclosure Letter.
I understand that Section 550 of the Companies Act 2006 only applies to private companies with one class of shares both before and after the proposed allotment. As such, section 550 cannot be relied upon if the proposed allotment will create a new class of shares. I also appreciate that you can allot a new class of shares under section 551 of the Act instead. If, however, you allot the same class of shares and then, immediately after that allotment, redesignate those shares into a new class with different rights, can you rely upon section 550 for the authority to allot those shares?
I have a client being offered an underlease. The original tenant in the lease was a company. The Company converted to an IPS which then amalgamated with another IPS. It is this second IPS offering the Underlease to my client. I am aware that when IPS's merge, s51 of the IPSA 1965 declares that all assets vest without any conveyance or assignment. Solicitor for the IPS offering the Underlease considers that the lease was assigned under this legislation when the company converted. Having considered the legislation (s50-s54) I cannot see an express provision for automatic vesting of a Lease when the original company converted to an IPS. My understanding is this would have required express authority from the Landlord and an assignment from the Company to the IPS. S54 (6) would confirm this in that the previous registration fo the Company becomes void. Please can you comment on what you consider to be the position in such circumstances.
The articles of a company adopted in 2004 provide that any section 80 authority may only be granted by "a resolution of the company with a majority of 65 per cent." Will this restriction continue to apply to any section 551 authority which the company proposes to grant? I am aware that under the transitional provisions, any existing section 80 authorities at the time the new regime came into force were to be treated as if they were section 551 authorities. Is section 551 intended to prevail over more restrictive provisions in the company's articles, or could such a provision which pre-dates the new Act operate to require a 65% majority for authority to allot?
Am I correct in my interpretation of share buy backs that if the directors choose to go down this method and acquire certain shareholders shares (and not others), then specific shareholders could be targeted to diminish their shareholding? Providing, of course that the correct procedures are followed. My understanding is that shareholders cannot vote in respect of their own shares that are being targeted in any event and so if the other shareholders agree (over 50%/75% if capital)they could force the purchase? I note that in buybacks out of capital they could apply to the court to request the application to be refused, does this apply for other buy backs? Otherwise, am I correct that their only recourse would be a possible claim for minority protection?
I am dealing with a company re-organisation. The first stage involves putting in place a holding company by way of share for share exchange. I will be applying for exemption from Stamp Duty under s77 Finance Act. A requirement of this is that the target company and acquiring company must have matching register of members. I would appreciate your thoughts on how to deal with the subscriber share in the acquiring company. I would propose to issue it to one of the shareholders in the target company and then note in the transfer agreement that he will receive one less consideration share on the basis he holds the subscriber share (so that the shareholding are the same as in the target). The alternative as I see it would be to issue on incorporation the same number of shares in the acquiring company in the same proportions as in the target but then there would be double the number of shares in issue in the acquiring company than in the target albeit they would be held in the same percentages. Would you agree that the first option is preferable. Many thanks
Can a company (private) take out keyman insurance on the lives of its shareholders/directors so that (subject to compliance with CA 2006) it can use the proceeds it receives on the death of a shareholder/director to buyback the shares of that deceased shareholder/director? In order to ensure that the policy proceeds are used for the purposes of such a share buyback, can the shareholders in a shareholders agreement (to which the Company is party) place an obligation on the Company to use such proceeds to buy back the shares of a deceased shareholder (subject to compliance with CA 2006) or should the obligation be placed on the surviving shareholders (in a shareholders agreement to which the Company is not party) to use all their powers as shareholders to procure that the Company use the policy proceeds to buyback the shares of a deceased shareholder (subject to compliance with CA 2006)? Thank you
I am acting for the sellers on a 100% share sale. More than ten years ago the company conducted a share buyback, with the company's accountants supplying the transaction documents. The buyback shares represented slightly less than 30% of the share capital. There was (and still is) only one class of shares. At the time, these were held by three shareholders (including the shareholder selling his shares back). Unfortunately, the buyback agreement specified payment for the shares via monthly payments over approximately four years, and the buyback therefore did not comply with s.159(3) of CA85 (it was not drafted as multiple completions). My reading of Pena v Dale and BDG Roof-Bond v Douglas suggests that rectification is not available, and that the original buyback therefore remains invalid. The buyer knows about this issue as the defective buyback documents have been disclosed. Do you have any practical suggestions and options for dealing with this issue, so as not to jeopardise the current share sale? I imagine trying to conduct the buyback transaction now (if the shareholder can be located) would entail a payment (or a waiver) regarding dividends over the years, as well as various accounting, tax and Companies House corrections / refilings. Alternatively the buyer would have to accept the associated risks, with suitable indemnification from my client. Many thanks in advance.
I was asked to provide a case law on any derivative claim in the UK as an example in order to show how derivative claims work in the UK. I would be grateful if you could give guidance on this. Thank you.
In the case where a company is raising money by the issuing of new equity securities and the company has pre-emption rights included in its shareholders’ agreement and has asked all of its shareholders for a wavier of these pre-emption rights, but one shareholders refusing to sign it does this simply means that a pre-emptive offer must be made to that specific shareholder every time shares are issued? Or does this situation require unanimous shareholder waivers such that every and all shareholders must waive their pre-emption rights? Does the company have to make a pre-emptive offer to every shareholder if one shareholder will not sign the wavier?
We act for a company which has two shareholders (Existing Co). Is there any way in a section 110 reorganisation involving the introduction of a Holding company above Existing Co and the distribution of assets of Existing Co into Newco 1 and Newco 2 (both Newcos owned by Existing Co) that we can end up with a structure whereby one shareholder retains the shares in Existing Co and the other shareholder holds the shares in Newco 2?
Is it possible to create a class of shares which have no rights at all? ie. non-voting, no rights to capital, and no rights on liquidation? Would you have a simple set of articles that includes the necessary wording?
How are odd lots under a bonus share issue typically handled? For instance, if a company would issue 1 bonus share for every 3 shares: what happens to shareholders who have a number of shares which is not a multiple of 3? If a shareholder has for instance 5 shares, would he be entitled to only 1 bonus share? Would he also be entitled to a cash payment by the company to compensate the subscription right to bonus shares for the remaining 2 shares? Is there a mechanism whereby the shareholder would need to make an extra cash payment to obtain a second bonus share?
I have a client that wants a new class of shares issuing. The want to move towards a more dividend based income model rather than paying salaries. The problem is that there are 8 directors with very different shareholdings, 1.5% at the lowest and 17.% at the highest. Is it possible to issue a class of shares which have voting rights, have no value from capital but do have a right to income? The voting rights also need to be small enough so as to not interrupt the current control. If this is possible, what documents would I need to effect the change?
What rights to vote does a member of a company have in respect of his shareholding, which he has charged to a lender? In this case the legal charge is silent as to the exercise as to voting rights. The charge has not become enforceable.
My question relates to s 845 of the Companies Act and whether a subsidiary could create a reserve in a parent of a nominal amount to allow a transfer of an asset at book value as opposed to market value. The purpose of the subsidiary declaring the dividend in favour of the parent was to allow the parent to then transfer an asset (in this case the shares in the subsidiary) to the ultimate holding company. So my question is in relation to three companies and does not relate to the subsidiary (which has plenty of reserves) transferring an asset to its parent, but rather putting its parent into a position whereby that parent can transfer an asset to the ultimate parent. Thanks
Small solvent limited company - I seem to recall that there was a simple procedure available to return capital to shareholders without need for a MVL, provided at a very modest level...Thoughts please!
On incorporation of a new company electronically at Companies House, do all of the shareholders need to consent/subscribe for shares? Can shares be subscribed for and held on bare trust for another person?
In circumstances where proper notice of a proposed special resolution is given to shareholders and only say for example 5 out of 10 shareholders attend the meeting. In determining whether the Special Resolution is validly passed would you require 75% of the shares held by the 5 attending shareholders to vote in favour of the SR? i.e. you would disregard the shareholdings of those shareholders who do not attend?
We are acting for a company that has a 70% shareholder and a 30% shareholder. It is intended that the Company will buyback the shares of the 70% shareholder (thereby resulting in the 30% shareholder becoming a 100% shareholder). We would want to insert warranties in the buyback agreement - however given that the shares would be cancelled on buyback would the Company still be able to make a claim for breach of warranty as the shares would have been cancelled on buyback (and therefore potentially no diminution on the value of the assets due to breach)?
In relation to Employee Shareholders: we are in process of incorporating a new company, it is proposed that, as part of the initial allotments of shares, shares are allotted to individuals (by then employees of the company) under the employee shareholder regime. We note the issues around payment for the shares and representing money’s worth. The relevant shares being fully paid in consideration of the individuals entering into the arrangements. In due course this company would be re-registered as a public company. In the context of the proposed re-registration of the Company as a public company, we would welcome your view on the following: - for the purposes of section 91, would the relevant shares be included for the purposes of determining whether the Company’s allotted share capital met the authorised minimum ? - for the purposes of section 92 and 93, if the relevant shares are allotted BEFORE the date at which the relevant balance sheet is prepared as required by section 92, would the consideration for the allotment avoid having to be independently valued under the provisions of section 93 (and section 593)?
If a transaction involves a shareholder (S) in a private limited company (C) acquiring new voting shares in C in return for the exchange of his existing non-voting shares in C, must that be analysed as a buy-back by C of its own non-voting shares in consideration of the allotment of new voting shares, so as to engage the buy-back provisions of Companies Act 2006? If that is the case, would the allotment of new voting shares fall to be treated as payment for the non-voting shares out of capital? If the voting and non-voting shares have the same overall values, would it be permissible for the documentation to record that C pays S £x amount for his non-voting shares and that S then pays C the same £x amount to acquire the new voting shares, and (if structured in this way) would the transaction then fall within s692(2)(a)(ii) Companies Act 2006?
I act form a members club incorporated as company limited by guarantee under the 1929 companies act. I think it would be worthwhile updating both, is it possible to use the existing precedent to cover a club that is already incorporated. I am considering whether it was required that the company update their articles and memorandum as per the precedent 4-518-6821 given that the original company was incorporated under the 1929 companies act, or whether it could retain the originals.
A Company was formed under the Companies Act 2006 and it adopted the model articles. The Company issued 1,000 unpaid subscriber shares to its sole member on day 1, the Company has never traded and is about to be wound up. How should the issued share capital be dealt with?.
A company sent out a written resolution asking members to sign and return the resolutions to the company's registered office. The resolutions were sent out by the company's solicitors. The members signed the resolutions but returned them to the solicitor. My question is, is this sufficient for the company to be deemed to have received the assent or does returning them to the wrong address mean that the company has not received notice of the assent? Is the solicitor under any duty to forward on the incorrectly returned resolutions to the company?
We are advising the sellers in the sale of a private company (not a subsidiary of a public company). The bank are taking security over the assets of target and it is proposed that the buyer's directors will be appointed as directors of target prior to completion ( the seller directors having resigned) and that the buyer directors will pass resolutions addressing the concerns highlighted in your note on what remains of financial assistance - i.e solvency of the target and unlawful distributions. They also require shareholder resolutions to be passed approving the security documents which include guarantees given by target for the liability of the parent under the bank facility used to fund the acquisition and also adopting new articles. The key question to which we we would be very grateful for early advice concerns the risk to our client of the transaction being set aside on the solvency/ return of capital grounds. Specifically - as we understand it, the guarantee under the security documents is a contingent liability for target when assessing its net assets for the purpose of determining solvency/ whether there is a return of capital. So if the buyer becomes insolvent after completion of the sale and there was a call under the guarantee which caused target also to go into administration and the administrator then looked back to the sale transaction and found that the directors should have identified the contingent liability as giving rise to a solvency/ return of
Does Article 26 (5) of the Model Articles mean that directors may refuse to accept a transmittee as a shareholder or does it only apply where a transmittee seeks to have the shares transferred to someone else?
I am dealing with a group re-organisation for a client. As part of this re-organisation we are due to transfer an intra-group loan up the group structure by dividend in specie. The loan is actually evidenced by a Loan Note that is stated to be non-transferrable and was created without a Loan Note Instrument. Is it possible to create a registered Loan Note without a Loan Note Instrument being created for it to be issued pursuant to? If so, how do you transfer a Loan Note? I was going to transfer it by means of an assignment, but I am given to understand that you can treat the loan note as a share given that it evidences the indebtedness and just complete a transfer (although no form for a transfer has been settled by the issuer as the notes are expressed to be non-transferrable). As the issuer is another group company, there will be no issue with obtaining their consent to the transfer. Any help you can give in respect of the above would be greatly appreciated.
I am advising on a reduction of capital prior to the striking off of the company concerned. In the Practice Note: "Reduction of Capital: overview" it is stated that a reduction can be effected by a return of assets to shareholders. Could you please confirm that a reduction of capital under CA S. 641(4)(b)(i) or (ii) could be effected by the distribution of asset(s), including the release of debt(s) due from the relevant shareholder, and not just a cash payment? Thanks.
Where a cumulative dividend has not been paid to preference shareholders due to insufficient reserves, and the shares are transferred to a third party before any dividend is paid, would it be the current shareholder who has the right to the dividend when it is eventually paid or will the original shareholder have a right to a proportion of it?
Is there a particular procedure that needs to be followed for a company to reduce its share premium account and transfer the amount by which the share premium account has been reduced to its reserves? Given this does not appear to constitute a reduction of capital, I'm wondering if this needs anything more than a set of board minutes to evidence the decision and to instruct the accountants to reflect the agreed adjustments in the relevant accounts.
Where the Shareholders' Agreement does not specify how exactly the shares of a leaving shareholder (who is also an employee) are to be dealt with upon him leaving the company, can the leaving shareholder's shares be cancelled by way of a capital reduction or does it have to be a share buy back? The Shareholders' Agreement states that upon a shareholder leaving the Company 'the shareholder will enter into such agreement and execute such documents as are necessary for the transfer of his shares back to the Company'.
Is it possible to transfer or assign the right to a dividend either in whole or in part for a finite period of time? Does an instruction to pay a dividend to a payee other than the shareholder constitute such a transfer or assignment?
Please could you confirm the reading of a paragraph in the practice note on Redeemable Shares. "Redeemable shares must be redeemed by a company in accordance with the terms attaching to those shares. If a company wishes to redeem redeemable shares other than in accordance with the existing terms of redemption, it will need to change the terms of redemption and obtain the requisite class consent. Alternatively, the shares can be repurchased by way of a share buyback". Does this mean that two resolutions are required to change the terms of redemption, one from all the shareholders and one from those in the class of shares being varied?
With regard to section 793 notices, what information is deemed to confirm the identity of a person or persons interested in the relevant shares? The Companies Act does not seem to prescribe a minimum set of information, which needs to be disclosed.
Company A is a wholly owned subsidiary of Company B - let’s say there are 100 ordinary shares of £1 each. Company A needs a capital injection into its share premium account for one reason or another. Rather than issue new shares to Company B for £x, Company B is planning to enter into an arrangement to pay £x into Company A's share premium, not by way of a loan. Effectively, this could be viewed as an arrangement to pay additional consideration/subscription amount for the shares Company B already owns. I've never seen this done before - have you? What are your thoughts please?
We are considering acting for a Limited Company on the purchase back of shares where the Vendors wish to sell their shares back in two tranches one in this financial year and the other in the next financial year after 6th April 2014. The company is concerned that if it enters into the first buy back it may not secure the purchase of the remainder of the shares in April next year and is considering requiring the shareholders to enter into an Option Agreement so that the company can call for the purchase of the shares in April next year. The company has sufficient distributable reserves to meet the transaction - is there anything that would prevent the company from entering into such an option agreement?
Under s.769(1)(2), a share certificate does not have to be issued on allotment if the conditions of issue provide otherwise. If a company wants to dispense with share certificates and have book entry only registration, then the position seems quite clear from the above with new shares. How do you dispense with the requirement for share certificates for pre-existing shares?
Aside from the fact that the decision must be one which may be taken by a company in general meeting, is there any limitation on the use, by a sole member, of s.357 Companies Act 2006? In effect, does s.357 provide a sole member with an additional method of passing any resolution (albeit that it is termed a 'decision' which has effect as if agreed in general meeting)?
We are trying to effect a reduction of capital to return surplus shares but do not want to cancel any shares or have a share premium which can be reduced. Could the capital be reduced on a pro-rata basis so that the number stayed the same, but effectively the nominal value alters from £1 per share to 37p per share thereby returning 63p to the shareholder?
As part of a reorganisation of a group of companies carried out in the past with advice from a third party, a subsidiary of the parent company transferred all of the share capital in its own subsidiaries (which had substantial value) to its holding company for nil consideration. The only documents in that respect are the stock transfer forms and approving minutes. The transferor was subsequently dissolved. Could the transferring company make a gift to its parent company in this way? Are the transfers of the shares in the two subsidiaries valid or invalid?
If a shareholder was to gift its fully-paid shares to a company for nil consideration, you suggest that those shares would then be held the company in its own name. Assuming that no action is then taken to effect a reduction in capital in relation to those shares, what is your view as to what should happen if a third party wished to acquire the entire issued share capital of the company, given that a company holding shares in itself is not a familiar concept to many people?
Company X is a private limited company and is proposing to carry out a share buy back. It has sufficient distributable reserves but insufficient cash. X is proposing to borrow money to fund the buy back and grant security to the lender. I am aware that: 1. there is an argument that the grant of the security could amount to financial assistance (even if the actual purchase of own shares does not); 2. private companies are not prohibited by CA 2006 from giving financial assistance; 3. the directors will need consider their duties and the solvency of the company (as detailed in your note on financial assistance). What I am not entirely clear on is what the position is in terms of unlawful reduction of capital. Is it the case that providing the company does not have to make any provision in its accounts in respect of the security, there is no issue? Thank you.
In a case of limited private company, I understand that there is no need to hold an AGM unless it is trading on a regulated market. However, your definition can be read that if such company carries "rights to vote at general meetings", there is obligation to hold an AGM. Can you clarify what you mean by "rights to vote at general meetings"?
We act for an investor who is to take 15% of the shares in a private company. the company currently has 100 shares of £1. the share capital is to be increased to 20,000 shares of £50 with our client subscribing for 3000 (i.e. a £150k investment). the 2 existing shareholders have 50 x £1 shares but, post investment, they are each to have 4500 x£50 shares. Other investors will subscribe to the remainder. The existing 2 shareholders haven't yet worked what will happen to the existing 100 x £1 shares but we cant allow them to keep these as ordinary shares. is it better to have these bought back by the company or perhaps to reclassify them as B shares carrying no voting or dividend rights thus leaving the new shares as ordinary A shares. or is there a better way?
One of our clients has issued redeemable preference shares. I note the articles which relates to redeeming shares and states that the process for redeeming preference shares is no different from redeeming any other class of redeemable share. However, within the articles of association for the company in question it simply refers to them having to issue a notice to the shareholders to redeem the shares. Is it possible to simply issue the notice and redeem the shares out of distributable reserves or does the capital reduction exercise (for a private limited company) need to be complied with?
Under the changes to the rules for share buy backs which were made by the Companies Act 2006 (Amendment of Part 18) Regulations 2013 would an advance authority for a share buyback cover a situation where an EBT is buying the shares from an ex-employee, who acquired them under an employee share scheme, and the EBT is then selling the shares on to the company. Under the articles of association of the company the employee is required to offer the shares for sale on cessation of his employment?
The Companies Act 2006, under section 310, states that notice of a general meeting of a company must be sent to every member of the company and every director (unless otherwise amended by way of the company's articles of association). Where there is no such amendment in a company's articles, and a member has granted a specific power of attorney to allow another person to receives notices of general meetings on his behalf, can and does this arrangement override the above statutory requirement for all members to receive notice? I would presume that this is the case, but have not located specific authority on this point. Please can you confirm?
Can you pls direct me to a document that has a draft list of matters reserved for the board in a FTS100 company, where each matter is defined and possibly with scope and values defined for each matter reserved?
I am setting up a intergroup investing company. I am looking at the model articles and the realms of what can be provided within the articles for this company. There will be several shareholders in this company and we would like to avoid matters of that require shareholder approval. Is it possible to delegate authority within the articles that shareholder approval is not required for dividends within the company? (i.e. the board of directors alone can authorise this?) Is this something that you can delegate authority within the articles?
With a Put and Call Option Agreement that allows for a series of share buybacks, is it possible to have a general waiver of pre-emption rights on transfer applying to all the share buybacks that may be implemented under the Put and Call Option Agreement or is it necessary to produce a separate waiver each time there is a share buyback under the Option Agreement?
Could a treasury share be sold on deferred basis i.e. 1p now and 99p later? Would such shares be subject to a call / lien whilst not fully paid up or is it just the rights that apply under the share sale contract on non-payment of balance?
I'm doing a three-cornered demerger. Your practice note says that the distributing company (here, the parent of the subsidiary to be demerged) declares a dividend (using reserves at least equivalent to the book value of the subsidiary to be demerged). Should the dividend therefore be done as a dividend in specie of the shares, can it be cash which is then satisfied by a share transfer, or doesn't it matter?
I have been asked to review a buyback structure under which: I) on completion the purchasing company is required to allot an A share to the seller (this is not expressed as consideration, merely a completion obligation) II) the A share entitles the holder to anti-embarrassment payments (in the form of A dividends) on certain trigger events. Is there a risk that the structure is invalid because: - the allotment of the A share is in substance consideration for the buyback - even if it did not take the form of share rights, the anti-embarrassment payment is a form of deferred consideration? (I have never really looked at anti-embarrassment in the context of a buyback before - I usually implement this sort of partial exit through a newco structure.)
A couple of questions relating to privately owned limited (by shares)company dividends: 1. Is it possible (ignoring issues of availability of distributable profits, for this question) to declare a dividend (either as an interim or final dividend) not of a specific amount per share but of an amount yet to be calculated - for example such amount as will on the future completion of accounts result in a Net Asset Value/Shareholders' funds of £100? 2. For dividends to be free of corporation tax when payable by a wholly owned subsidiary to its holding company - and ignoring for this question anti-avoidance provisions - is the relevant date (in circumstances where the issue is a company ceasing to be a subsidiary between declaration and payment of the dividend, not becoming a subsidiary) for the test of control the date of the resolution (either directors' or shareholders' resolution for interim and final dividends respectively) or the date of payment or both?
A new client has lost some bearer shares that were issued at some stage in the past and would like to now cancel them; is this possible and if so, can you please state what procedure should be followed? Thanks.
Can you help with this please? We have a scenario where a company has issued dividends to some shareholders but not to others. My view is that the Articles must allow the payment of dividends to certain classes but not others, and in the absence of such a provision, then all shareholders will be entitled to the same dividend. What is the current position in relation to this? There does not seem to be a lot of case law on this.
In your note about Employee Shareholders you say that you have asked BIS for an update on whether it is open to the directors of any given company to seek to satisfy themselves that entry into the section 205A(1)(a) agreement by the employee could in itself constitute adequate capital contribution for the allotment of fully paid employee shareholder shares or whether it would be necessary for the company to record that the shares are paid up by way of capitalisation of distributable profits. Have you received a response from BIS in relation to this matter? Many thanks.
Following the re-registration of an unlimited company to a limited company what is the extent of the liabilities of the company to judgments entered against the company (exact amounts pending) before the re-registration took place?
I am working on a transaction which has been put together by a firm of accountants. The current proposal is that part of the consideration payable for the shares in a private company is to be satisfied by the target company transferring out some of its assets (namely property and equipment) to the sellers (individuals) who will then lease those items back to the buyer company. Whilst I'm not concerned about this from a financial assistance point of view as the transaction only involves private companies I'm concerned about this from a maintenance of capital point of view as the company's assets will be reduced considerably and the value of the assets to be transferred out will exceed the amount of distributable reserves of the target company. Normally I would expect to see the assets hived up from the target company to the buyer with a corresponding accounting entry in respect of an inter-company debt due from the buyer to the target company and then those assets transferred from Buyer to Sellers as discharge of the monies owed by the Buyer (all at market value rates). Any thoughts on the ability of a target company to transfer assets direct to the Sellers as part satisfaction of the purchase price for the shares in the target company or any other relevant considerations would be most appreciated.
I have been instructed to deal with a transfer of shares, and a discrepancy between the AR01 and the company accounts has revealed that the majority of shares in issue are only part paid - £1 shares with 50 pence paid. The transferee is acquiring the shares as a gift and needs to ensure that he will not be called upon to pay the remainder. To resolve this, I believe that we need to sub-divide the shares into 50 pence shares, half of which are fully paid, the other half not paid, and then buy back the nil paid shares. We would also sub divide the two fully paid up £1 shares. Do you agree, or is there an alternative?
What are the consequences of a failure by members of a private company to pass a special resolution to authorise an off-market purchase of the company's own shares? If there does turn out to be a special resolution, is it necessary to file a copy of this at Companies House, and would there be any consequences for failure to do so?
A private limited company wants to reduce its issued share capital through the solvency statement procedure. Prior to the capital reduction the share capital of the company is held 50:50 between two shareholders. It is agreed that one of the shareholders will have their shareholding reduced, such that following the capital reduction the shareholding will be 70:30. Is it necessary to subsequently enter into a share buyback following the capital reduction or, is it sufficient that the members of the company have signed a written resolution to the effect that the capital of the company will be reduced by x pounds and that it will be the shares owned by x shareholder which are affected. Following the reduction there will be no distribution to the shareholders as the consideration in respect of the capital reduction is non cash consideration.
I recently completed a share restructure for a company as part of an MBO. This completed at the end of February 2013. Before completion there were four shareholders, two of which had A shares and two of which had B shares. After completion of the MBO all shareholders were assigned ordinary shares. There was an agreement between the directors/shareholders (who are the same people) that the shareholders should receive dividends up to the end of February based on the profit for that year up to that date and in accordance with their shareholdings at the time. The end of the financial year was August 2013 and as such accounts were prepared/finalised etc and the figures for the dividends were finalised. The problem I know have is that I want to declare dividends on the shareholding proportions as they were before completion of the MBO and not as they stand now. Is this possible, and if so, how do I go about it? I was thinking I would simply draft a comprehensive board minute setting out the agreement between the directors/shareholders backed up with a shareholder resolution/consent. Would this be sufficient? And at what date would the dividend actually be declared? If we backdate it to before the MBO then I understand we will need to be comfortable of the Company's financial position at this time. Many thanks for your help.
What are the consequences of a subscriber's address being incorrect in the memorandum of association and the Form IN01? I understand that this cannot be rectified by filing a form with Companies House. Thank you.
In your practice note titled Redeemable Shares (http://uk.practicallaw.com/0-502-0286?q=redeemable+shares), reference is made to the apparent inconsistency between the wording in section 687(3) and 692(2) regarding the ability of a company to pay a premium on the redemption of shares out of capital. PLC states that it believes that s687(3) should be interpreted in the same way as section 692(2) which allows a company to pay a premium on the purchase of its own shares out of capital. Have you received any response from the Department of Business, Innovation and Skills in relation to this?
If a company has not allotted shares but a form SH01 is filed (in error), should, for example, the accounts or register of members refer to the allotment (because it appears on the register)? The company may be entitled to apply to remove the form but, unless and until it does, what "force" does it have and what notice should be taken of it?
A private limited company has share capital, capital redemption reserve (arising on a previous purchase of own shares) and very little distributable reserves. It is intended to reduce capital by the solvency statement route. None of the share capital will be reduced only the capital redemption reserve. The resolution will be filed at Companies House together with a form SH19 (which will reflect no change in the number of shares), are there any other filing requirements in respect of the creation of the distributable reserve by the reduction of the capital reserve?
Can a charity operate as a limited company (limited by shares) under the Company Act 2006? I am aware that a charity can operate as a company limited by guarantee but am not sure whether it can operate as a private limited company.
What is the position if you have a Shareholders Agreement (where there are only 2 shareholders) that simply provides no shareholder can transfer his shares without the consent of the other shareholder and one of the shareholders dies? Do the PR's of the deceased shareholder simply hold the shares until the surviving shareholder agrees to them being transferred to a person(s) he is agreeable to?
Board minutes for approving a reduction of capital using the solvency statement procedure 7.1 b refers to convening a meeting what is this for - these are already the minutes of a meeting occurring at that time? Is a special resolution required of shareholders of the company? What is the order of the process e.g. send out notice of meeting board meeting, solvency statement and compliance statement can all be reviewed and if agreed signed at the meeting. shareholder approval yes/no? and if so when? then SH19 and file all 4? in theory can all documents be reviewed and agreed on same day?
My firm is dealing with the estate of a deceased client (the Deceased). The Deceased ran a company in which he owned shares. The shares pass to his widow under his Will. However, it was always the wish of the Deceased that the current MD of the company should have the opportunity to buy the shares and run the company after his death. The MD cannot afford to buy the shares and has proposed a company buy-back of shares by instalments. Obviously, this cannot be done as all of the shares would need to be paid for at completion. Also, the company does not have sufficient distributable reserves or capital. Other than advising that the MD seek investment funds from a third party, is there another solution? For example, by way of an asset sale?
The scenario before me is as follows: A private limited company wishes to carry out an off market own share purchase of a shareholder’s shares (100 shares). For the purposes of this query, the total consideration that will be payable for the own share purchase will be £1,000. However, the company wishes to carry out the purchase in 10 tranches (purchasing 10 shares for £100 each time), all documented in an agreement, and conditional upon the company having sufficient distributable reserves at the time of each tranche. In this scenario, would the company need to have distributable reserves of £1,000 (being the whole value of the own share purchase) at the time of entering into the contract, or would it suffice that the Company has enough distributable reserves in order the complete each tranche (i.e. £100 for each tranche)? My initial view is the latter, on the basis that the distributable reserves of £1,000 at the time of entering into the contract, may well have depleted by the time we get to one of the tranches, and therefore, the requirement should only be to have sufficient distributable profits at the time of each tranche.
Your Practice Note, Employee shareholders (draft) states: "As there is no statutory authority permitting a company to make a bonus issue or to capitalise its reserves, the company's power to do so relies on adequate provisions in its own articles of association." Our client has Table A articles and wishes to capitalise its reserves to pay up the nominal value of shares to be issued to a non-member. Can this be authorised by an ordinary resolution of the members, or do the articles have to be amended?
Is it possible to allocate a portion of existing nominal share capital to a share premium account? For example, could you take 100 outstanding shares of £1.00 nominal value each and change them into 100 shares of £0.01 nominal value each with a premium of £0.99 each? If so, what would be the process for changing the nominal / premium split?
The update refers to "It will be necessary to check that the company’s articles of association permit the appropriation of capitalised sums to non-members", however, if share premium is to be used for the bonus issue wouldn't it only be available where the employee shareholder was already a member of the company, irrespective of what the articles said, due to the impact of the s610(3) of the Companies Act 2006 (application of share premium) and its reference to "use the share premium account to pay up new shares to be allotted to members as fully paid bonus shares". Your thoughts on the above would be much appreciated.
Is it necessary for there to be an actual employee share scheme in place for a company to make use of the Buyback Regs? Or do the words "for the purposes of an Employee Share Scheme" allow a company to purchase shares for a future employee share scheme?
I have a question about Charitable Incorporated Organisations. We are a limited company registered under the Companies House and are seeking to convert into a CIO. Is this possible? I notice on your practice note that other types of charities can covert but nothing about an already registered limited company.
I am looking to find the simplest way to arrange for an associated company ("company A") of another company ("company B") to "return" some nil paid shares in company B to company B (for nil consideration), in circumstances where both company A and company B have agreed that this should happen for structural reasons. Both company A and company A are private limited companies. As the shares are nil paid then a share buyback and a gift for nil consideration do not seem to be available. The relevant part of company B's Articles of Association is contained in the 1985 Table A Regs. This would appear to require the full forfeiture procedure to complied with (making calls etc) and does not permit company A to simply surrender the shares (even after the initial call), which both companies would prefer, as this is being done on a "friendly" basis. Is that correct and, if so, do you have any other suggestions as to how best to effect this in the simplest possible way (a capital reduction is rather over-complicated for what is trying to be achieved?
Other than winding up of the company, what is the position when there is a dispute between shareholders each owning 50% of the company (also being the only two director of the company) and where there is no shareholders' agreement in place and the articles do not provide for compulsory transfer or deadlock provisions?
Pursuant to section 692(1) and (2) If a premium is payable on shares to be bought back by a company, it must be paid out of distributable profits. Further the price to be paid for the shares will have to be disclosed to the company’s shareholders. In the scenario I’m thinking of, the company is buying back the shares for a value of more than the shares are actually worth. The motive is effectively to buy out the relevant shareholder. Is there any other provision in the companies act to be aware of which would affect the transaction, due to the fact that the price the company paid for the shares was above market value?
A company does not have enough money to buy back shares from an exiting employee (not subject to an employee share scheme). I appreciate that shares must be paid for on purchase. However, is there any issue with using the buyback contract to obliging the exiting share holder to sell the remaining shares back to the company on certain conditions (sufficient funds) being met? Also, does PLC have any relevant precedents?
We are advising a seller on a proposed share buy-back out of distributable reserves. The draft buy-back agreement presented envisages multiple completions (a number of tranches in total), with completion of each tranche subject to the company having sufficient distributable reserves. Aside from the fact the contract is conditional (so no guarantee for the seller that any of the tranches will complete), it also states that, on entering into the contract (when the first tranche will complete) the beneficial ownership of the seller for all the sale shares will be transferred to the company with full title guarantee and the seller waives all rights to dividends etc. (indefinitely). It also includes a provision which states that, until such time as the transfers for the sale shares are registered in the register of members, the seller will hold the shares registered in his name on trust for and as nominee for the company. Furthermore, the contract obliges the seller to deliver stock transfer forms for the sale shares to be held by the company provided that they shall only be dated on relevant completion date for each tranche. We are told that the transfer of the entire beneficial ownership is a pre-requisite to ensure the consideration is treated as a capital gain but are concerned that there is something not quite right with the current proposed structure. How does the suggested structure fit in with the strict requirements under the Companies Act 2006 (a breach of w
Do the deemed distribution rules apply to distributions in kind between a company and the sister company of its parent company? I understand that the rules apply as between sister subsidiaries controlled by the same parent (as per the Aveling Barford case), but would a distribution in kind at less than market value (i.e. a loan waiver) by a subsidiary with no distributable reserves to the sister company of its parent company be caught as an unlawful distribution?
Dividends: On the sale of a 50% shareholding to the ongoing shareholder and following the preparation of completion accounts and a net asset adjustment both to be dealt with post completion , the parties wish to issue any available profits relating to the previous year's trading by way of dividend to themselves on an equal basis . However, the outgoing shareholder will no longer have his shares at the point of the distribution. Can I provide in the SPA that the outgoing shareholder will receive dividend in relation to his shares up to the point of sale even though the distribution will be post sale ? They do hold different classes of shares with equal rights .
My client's accountants have recommended that my client carry out a share buyback where the consideration for the purchase if £nil. The shareholders in question are happy to proceed this way as it is part of a larger reconstruction but I have not come across a share buyback being carried out at £nil consideration. Is this even possible? I cannot see any prohibition in the CA'06. Thanks
Under a shareholders' agreement, shareholder A agrees to transfer his entire shareholding to Shareholder B on his death. However, in his will, shareholder A subsequently bequeaths the shares to a third party in contravention to the shareholders' agreement. In this instance does a shareholders' agreement take precedence over a will?
We are aware of the process under section 62 of the Industrial and Provident Society Act 1965 which allows an Industrial and Provident Society to convert to a Company Limited by Shares or Guarantee. Is there a process which allows a Company to convert to an IPS by simply passing a resolution or would this require the incorporation of an IPS and transfer of business and assets?
Why are the rights of pre-emption contained within the precedent shareholders' agreement rather than in the precedent articles of association? Are there any particular benefits of incorporating them into either document?
We have a single member company with Table A Companies Act 1985 with a quorum of two for general meetings (article 40). Does section 318 Companies Act 2006 permit a quorum for an AGM or will the articles need to be amended?
On re-registering a company limited by guarantee as an unlimited company, is it possible to change the status of the company from an unlimited guarantee company to an unlimited company with a share capital? I appreciate that, ordinarily, such a conversion cannot take place but in circumstances where the Company becomes unlimited is this possible?
Annual General Meetings: we have a client who is saying that shareholders are entitled to submit 1,000 word information requests to a company to be raised at the AGM. Is this correct and do the directors have to consider such requests ? Are there any time limits for submission of these requests ?
I'm drafting an own share off market purchase agreement between a company and its only 2 shareholders in which they will each sell 5000 shares to the company (5% each) at par for cash. Your checklist provides that the written resolution excludes those who shares are being bought back. In my case I wouldn't then have anyone to sign the written resolution. Can they sign it anyway or could I get round this by having 2 separate resolutions?
Removal of Capital redemption reserve from a private limited company's accounts. Can you assist with how to remove what is showing in the accounts for a private limited company as £4,403.00 capital redemption reserve from May 2012 and April 2013?
I am looking to issue employee shareholder shares under the new employee shareholder regime which requires the shares to be issued fully paid up, requiring the capitalisation of profits/reserves. The company I am seeking to do this for has significant losses and is balance sheet insolvent (although is able to pay debt as it falls due as other parts of the group are profitable). Is it possible to reduce the share capital, creating a capital redemption reserve, and capitalise this in order to issue bonus shares? It appears that the net position would require the realised losses to be netted off against the realised profits (which the cap reserve would be treated as) but I'm not clear if this is actually the case. Thanks
A husband and wife own 50% each of a private ltd company. They ultimately want to leave the company to their son but they are worried about what would happen if they both died on a Wednesday and employees needed paid on the Friday. Basically, their concern is that the practical jobs such as the day to day running of the company would be problematic should they die at the same time. They want to include a clause in their will that their personal reps can run the company straight away without the need to get a grant. I have researched this and discovered that if they have adopted the model articles then personal representatives themselves can appoint a director of the Ltd company and this power comes in on death if they are named as the personal reps in the will. Their articles of association are very similar to the Model Articles but the section relating to appointment of directions states that 'in any case where, as a result of death or bankruptcy, the company has no members and no directors, the transmittee(s) of the last member to have died or to have a bankruptcy order made against him shall have the right by notice in writing to appoint a person (including a transmittee who is a natural person) who is willing to act and is permitted to do so, to be a director.' My question is, what is a transmittee? Is a transmittee a personal representative? If not, what sort of clause would be effective in the will to ensure that the running of the company continues without t
In the below link you advised that Capital Reduction could be utilised as an alternative to a share buy back. Are you able to provide a comparison on the two procedures in respect of the pros and cons of each method?
We have a client who is going to let their largest shareholder have a representation on its board as a non-exec director. the fees payable is cash and shares. Can the fees be directed so that it is payable to the shareholder instead of the individual who will be appointed a director? I suspect it is not possible for lack of consideration on the shareholder's part.
I was instructed on a share buy-back which was effected by way of distributable reserves. The transaction successfully completed a few months ago. In essence, the anticipated profits on the deal were taken into account when a dividend was declared moving money up from a subsidiary to the holding company to increase its distributable reserves. It may now transpire that the distributable reserves were not in fact available. I should be grateful if you would please advise me as to the position that the company may now find itself if the distributable reserves were not available. Any information at all would be gratefully received.
A shareholder being a family trust is requesting a company pay the dividend to which it is entitled directly to the beneficiaries of the trust. As the beneficiaries are not shareholders I intend the company declare the dividend and ask the trustees to direct them in writing to pay the sum due directly to the beneficiaries and to indemnify the company and directors for any liability arising from acting in accordance with their instructions. Presumably this will be sufficient for the directors to have complied with payment of dividends to members only?
Company incorporated under 1985 Act, wants to do something expressly prohibited by articles (issue new shares without offering first to existing shareholders) – can the company authorise this as a one-off by an SR (there is no express power in the articles to do this), or is there no alternative to changing the articles?
I have seen your response to the question "Share buybacks: is a stock transfer form required where repurchased shares are to be held in treasury?" and I agree that there is logic for using a stock transfer form when transferring INTO treasury. Do you agree that a stock transfer form is required when shares are either sold (to a third party) or transferred (for the purposes of an employee share scheme) OUT OF treasury?
A reduction of share capital takes effect on registration of the solvency statement, members' resolution and statement of capital by Companies House. Is the issued share capital automatically reduced with the filing of these documents at Companies House, or are there any subsequent procedures to reduce the issued share capital?
Under section 29C of the Industrial and Provident Societies Act 1965, it says that an Industrial and Provident Society (IPS) can execute deeds by a ‘secretary and a member of its committee’. What is the difference between a ‘member of its committee’ and a ‘director’ of an IPS? If a deed was executed in the wrong capacity, is there any provision for IPS’s which means the company will still be bound, i.e. that mirrors s40 of the Companies Act 2006 provisions.
If a special resolution creating a class of preference shares (in a private limited company) does not expressly state that the preference shares will be non-voting (except in the case of the dividend being in arrears), would it follow then that the preference shares will have full voting rights pari passu with the existing class of ordinary shares?
Where there are two shareholders holding 50% of the shares in a private limited company, how can an effective resolution be passed to buy back on tranche of 50% as that shareholder cannot vote on the resolution?
We are acting for a company adopting 1985 Model A articles. One of the shareholders currently has shares that have not been paid for. What is the process for forfeiting the shares and what filings would subsequently need to be made at companies house? I think there are two possible ways to forfeit the shares: one way is through the Companies Act s.641 which would require a Special Resolution and the other way is to use the articles which sets out a process whereby the directors themselves can implement a forfeiture. Our client does not want to have to hold a shareholder meeting if possible.
In a situation where shareholders wish to remove a director but also wish to effect a number of matters via a general meeting (change of articles etc), what is the relationship between the provisions relating specifically to the removal of directors under s168-9 CA 2006 and general requisitions of meetings by members under s303? I appreciate that the s168-9 procedure involves special notice of 28 days, but the s303 procedure allows the board 21 days to call the meeting and then the notice period of 21 days itself (whether called by the board or members) so the director concerned would not be prejudiced as far as time limits are concerned.
A client has incorporated a company with 100,000 ordinary shares of £1. However, when he incorporated the company, he mistakenly thought that he was simply detailing the maximum authorised share capital, and not the issued share capital. The shares have therefore not been paid for, and there is no provision in the articles of nil paid shares). What is the procedure for rectifying a mistake and cancelling these shares, save for, say, £100 ordinary shares of £1?
Practice note on demergers says in relation to a dividend in specie of shares from a parent company to its shareholder: " Any unrealised profit or loss actually shown in the parent's books in relation to the subsidiary is treated as realised on the demerger (section 846, CA 2006).". Paragraph of the ICAEW technical release 02/10 states that "a dividend in kind from a subsidiary is an unrealised profit in the hands of the parent (even where there is a cash alternative) unless the asset distributed meets the definition of qualifying consideration. However, if the non-cash asset is distributed by the parent then, following section 846, that unrealised profit would be treated by the parent as a realised profit for the purpose of that onward distribution, provided that the profit was recorded in the relevant accounts." I think this means that if the parent transfers shares to its shareholder (also a company) by way of dividend in specie, the shareholder must treat this as an unrealised profit. However, I think the shareholder is entitled to treat the distribution to it as a realised profit (and can therefore count it when calculating distributable profits) if it makes an onward distribution to its own shareholder. My question is: the explanatory notes to the Companies Act possibly suggest that section 846 only applies to situations when the shares have been revalue by a parent (thereby resulting in an unrealised profit in the accounts) and would not therefore allow a sh
My query concerns ordinary shares to which voting rights are attached. The shares are currently held on trust and as a result the trustees are unable to exercise the voting rights attached to these shares at general meetings. Are these shares still considered shares that carry voting rights for the purposes of section 303(2)(a) of the Companies Act 2006 even though such rights are not currently exercisable by the trustees.
If there were pre-emption rights within the Articles of a company, is there any reason why a shareholder to which the pre-emption rights apply could not hold shares on trust for a beneficiary who would not be offered the shares by virtue of the pre-emption rights? Any guidance PLC has would be appreciated.
I have been asked to cancel redeemable preference shares which are treated as a creditor under FRS 25 and not shown as share capital on the balance sheet. Do I treat this as share capital and file solvency statement documentation or is the reduction simply an accounting transaction? Secondly, can the reduction be for nil consideration? The company does not have profits to cover the par value of the total amount. They were previously redeeming a small amount each year.
Under a s110 Insolvency Act 1986 quoted company merger between two companies where the aquiree entity has two share classes, which (if any) of the following resolutions would be deemed to affect rights attaching to shares such that a requirement to hold separate class meetings of the acquiree company was required: 1. Approval of a merger whereby the acquiree transfers all assets to an acquirer as consideration for the issue of new shares in the acquirer to shareholders of the acquire: and 2. The winding up of the acquiree company. I think that no class meetings are required on the basis that neither of these proposals affects the rights attaching to a particular acquiree share class but I would be happy to hear your thoughts.
Is it necessary to amend these Articles of Association of a company where the shareholders pass a resolution under section 551 to create a second class of shares if the resolution sets out the rights of those shares. In other words, is it sufficient that the rights of the new class of shares are set out in the resolution only without amending the Articles to set out the rights of the new class of shares in the Articles?
Shouldn't article 15 say something like: 15 Subject to the Act but without prejudice to any other provision of these Articles, the Company may purchase its own shares: 15.1 out of capital in accordance with Chapter 5 of the Act; or 15.2 with cash up to any amount in a financial year not exceeding the lower of: (i) £15,000; and (ii) the value of 5% of the Company's share capital. Otherwise it could be read as a restriction on buybacks made which don't use the new deregulated mechanism?
If a resolution is passed by members at a general meeting, based on information which, after the meeting and approvals, turns out to be incorrect; does this invalidate the resolution? How would you rectify it?
We are in the process of preparing Articles of Association and a Shareholders Agreement for a client. The client's accountant have asked whether redeemable shares (to be set up in a separate class of B shares) which will be held by several different shareholders can be repaid to each individual at separate times or whether they have to be paid proportionately.
Given that a buyback is not a transfer as such, is it absolutely necessary to obtain either the prior written consent of all the members or a pre-emption rights waiver from all members where the articles provide that 'shares may be transferred to any other person with the prior written consent of all the other members' and where all other transfers must go through a fairly standard pre-emption rights procedure. There is no pre-emption carve out for buybacks and in this case getting the signature of 100% of the shareholders in time may prove difficult.
We have a PLC incorporated under normal model articles in accordance with the 2006 Act. When are they required to hold their Annual General Meetings i.e. is there a time frame within which they must be held?
We're comfortable that no stock transfer form is needed if the shares to be bought back are being cancelled. But do you think an STF would be required where the shares to be bought back are to be held in treasury as that looks more like a transfer - the company becomes registered as a member?
Where a company reduces its share capital by way of a solvency statement in order to make a payment to shareholders; once the reduction has been lodged and registered at companies house, is there a required/recommended timescale in relation to the payment being made to the shareholders? In most cases the return would be paid out as a dividend which is at the company’s discretion/related provisions in the Articles, would it simply be a case of payment being made at the company’s discretion?
If a private limited company is reducing its share capital to repay shareholders (i.e. not creating a reserve, is there any statutory or other provision requiring the payment to be made within a prescribed time period once the resolution has been passed?
I have a company with 1985 Act articles incorporating Table A that wishes to issue nil paid shares as an employee incentive. I can amend the articles to allow payment of dividends on the number of shares held rather than the amount paid up on them, but if I do so can the company then issue dividends on the nil paid shares as it sees fit or are there any other restrictions that should be taken into consideration?
Is it possible for a shareholder to grant an option to a company (in which he owns shares) to buy back his shares in certain circumstances, e.g. upon a shareholder leaving employment with a company within a certain period of time from acquiring the shares? I would be grateful for any guidance on this. I appreciate that the articles of association of a company will need to be checked to see whether buy back of shares is not prohibited, etc.
Please can you confirm if an unlimited company with the following articles can reduce its capital redemption reserve by special resolution: • standalone articles of association that do not incorporate any regulations or articles set out in any statute, or in any statutory instrument or other subordinate legislation made under any statute concerning companies; • an interpretation clause stating that "Unless the context requires otherwise, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the Company" - the articles were adopted on 21 March 2012; • "The company may by special resolution reduce its share capital and any share premium account in any way". This is the same power as included in Table E, Companies Act 1985. Our view is that an unlimited company should be permitted to reduce its capital redemption reserve by special resolution (limited companies are permitted to do so under s.641 Companies Act 2006) but that it may be necessary to amend the company's articles to include the express power to reduce its capital redemption reserve. We have not, however, been able to find any specific case law or commentary to support this view and it seems odd that Table E, Companies Act 1985 did not include reference to capital redemption reserve. We note that pursuant to s.733(6) Companies Act 2006, the provisions of the Companies Acts relating to
In relation to the question of whether a company is "authorised to [buyback with cash] by its articles" under s692(1)(b) CA2006, can I assume that Regulation 35 of Table A 1985 is sufficient authorisation (private company may make a payment 'otherwise than out of distributable profits or the proceeds of a fresh issue')?
Do treasury shares of a PLC on the main market lose their listing and admission to trading so that when they are used as a source for employee share scheme, does one need to re-apply for admission to listing and trading? Also, does a company need to apply for admission to listing each time shares are allotted or just for each class of share? Thank you
I am aware that any provision in a company's articles of association is void in as far as it has the effect of excluding the right to demand a poll at a general meeting (section 321 of the Companies Act 2006). Can this right be excluded between shareholders in a shareholders' agreement?
I am dealing with the purchase of own shares by a private company from distributable profits. The shares are being transferred in tranches over a number of years and are being paid for in cash when the shares are transferred. Is it sufficient for the shareholders to approve the contract and its terms now or are they required to approve its terms prior to any future buy back? I appreciate that the Company may not be in a position to comply with the terms of the contract if sufficient distributable reserves are not available when the time comes for the shares to be bought back.
Where an employee is subject to good leaver/bad leaver in respect of shares that he/she holds in his employer company, in the absence of any provision to the contrary, presumably the employee can sell those shares to a third party (subject to any pre-emption rights) before he becomes a bad leaver e.g. before he choses to resign. Do you have any provisions for articles of association that would prevent this?
How does a topco company buy back shares with distributable profits when all profits are held by the operating company lower down in the structure? Can dividends be made through the structure to the topco?
We are intending to strike off a subsidiary and are currently in the process of cleaning up the balance sheet before we do. The company is owned by three shareholders holding 1, 45 and 45 shares respectively. The company is owed a debt which it in turn owes to one of its shareholders that holds 45 shares. We are looking to re-assign the debt to this shareholder. Please can you let me know the easiest way to do this? Would it be board minutes approving the re-assignment and deed of novation? Could we do this by dividend in specie given that we need to dividend up to only one of the three shareholders?
We act for a company that has no distributable reserves (and has realised losses) but wishes to transfer a lease by way of dividend in specie. As I understand it, under section 845 the company will need distributable profits equal to the book value of the lease, and under section 846 the revaluation reserve can be treated (for this purpose only) as a realised profit. The revaluation reserve in the last accounts is less than the book value of the lease but if interim accounts were prepared now the revaluation reserve would exceed the book value of the lease. However, presumably the revaluation reserve will need to be at least equal to the value of the losses (to extinguish the losses) plus the book value of the lease (to comply with s845)? Is that correct? Also, is it permissible to use revaluation reserve to 'increase' distributable reserves even from a negative starting point? ICAEW Tech Release 02/10 on Realised Profits at para 2.9D refers to this in context of section 845 CA06 but not section 846. Finally, am I right in thinking that interim accounts will be needed as 'relevant accounts', but not a formal valuation (although this would obviously assist the directors in showing that the values in the interim accounts are fair and reasonable, and that they have complied with their duties). I realise that you cannot give specific advice but any general guidance you can give would be much appreciated.
Following the amendment made to Part 18 of the Companies Act 2006 in April this year, I have noted that only an ordinary resolution is now required for an off-market buyback of shares in a private company (s.649) (previously a special resolution was required). Will a private company partaking in an off-market buyback of shares, using only an ordinary resolution have to file any documents at Companies House? What are the filing requirements for this situation? Many thanks in advance.
Hello I was hoping that someone may be able to help me with something I am looking in to. It concerns Article 33 of the Model Articles, which provides that: 1.1 All dividends or other sums which are— 1.1.1 payable in respect of Shares, and 1.1.2 unclaimed after having been declared or become payable, may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed. 1.2 The payment of any such dividend or other sum into a separate account does not make the Company a trustee in respect of it. 1.3 If— 1.3.1 twelve years have passed from the date on which a dividend or other sum became due for payment, and 1.3.2 the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the Company. My question regards this reference to 12 years. As far as I can see from my research, 12 years is the usual time limit for returning unclaimed dividends but I can't see any authority for this in the CA 2006. I was wondering if someone with their expertise could advise me if this 12 years is just the 'norm' or whether there is a statutory basis for it? If not, could it be extended or reduced for example?
If notice of a shareholders' general meeting of a private company is given and there is, before the date of the meeting, a change in the numbers of shares held by the existing shareholders on a poll is it the number of shares registered as held at the date of the notice or the date of the resolution that are taken into account?
The directors of new client which has 2 classes of shares - ordinary and A ordinary - have issued A ordinary shares without the necessary members' authority to allot. I am preparing a ratifying resolution. Can you confirm that the ratifying resolution should be circulated to all of the current shareholders, i.e. including the ones who received shares allotted without authority?
Your note states "Increasingly companies are getting around the shareholder vote by failing to declare a final dividend and paying a series of interim dividends instead." Is it therefore the case that the directors may declare an interim dividend, subject to their being distributable profits, and this need not be declared by the shareholders after year end? I.e. directors pay £1m in dividends, shareholders need not declare the same £1m? Thanks
If a company's majority shareholder is a corporate entity, i.e. a company, is it enough that a director from that company attends the meeting or does the majority shareholder need to appoint a corporate representative to act on its behalf at the general meeting?
I refer to the recent amendment introduced by the Buy Back Regulations pursuant to which a company may purchase its own shares otherwise than out of distributable reserves under the de minimis cash exemption. In brief, my question relates to the authorisation required under the company's articles of association. I note that the practice note (mirroring the legislation) provides that "a private limited company may now, if authorised to do so by its articles, purchase...". Does the company need express provision in its articles to use the de minimis exemption or, as is the case with a buy back out of reserves under the 2006 Act, is the absence of a prohibition sufficient. Finally, in the present case, the company has adopted articles under the 1985 Act which expressly permit the purchase of own shares “whether out of distributable reserves or otherwise”. Is this express permission likely to be sufficient to allow a purchase under the de minimis exemption or are new articles likely to be required?
Where consent is required by the shareholders of a private limited company for the sale of land does the contract have to be available in advance of an EGM for inspection by the shareholders and if not how much detail of the contract needs to be in the resolution?
A public company which is unlisted has changed from having 2 members (one which was a nominee shareholder) to a single member company as the requirement to have 2 members was removed from Companies Act 2006. However, the Articles of Association were not amended (there is no requirement to have 2 members). However, in relation to AGMs or GM the articles of association state that it requires 2 persons entitled to vote upon the business being a proxy or corporate representative shall be a quorum. Does this still apply if the company is now a single member company in accordance with s318(1) or do the articles need to be followed and 2 proxies have to be appointed? I look forward to your response.
Is there a statutory or common law derived minimum quorum for a board meeting of a company limited by guarantee which has two directors? What was the position under the Companies Act 1985 and has this changed with the coming into force of the Companies Act 2006?
I am working on a share buyback transaction and wanted some clarification on The Buyback Regulations 2013 which introduced a new method of funding a share buyback. I understand that a private limited company may now, if authorised to do so by its articles, purchase its own shares with cash up to an amount in a financial year not exceeding the lower of; £15,000 or the value of 5% of its share capital. Please kindly confirm whether this method of funding is available where the total transaction will be higher than £15,000? Is our client able to use this method and then pay out the remainder of monies from the distributable profits? Can any procedure be used in relation to the share buyback or is the new method of funding only available to stand alone transactions less than £15,000?
We act for a parent company which proposes to write off a debt owed to it by its wholly owned subsidiary. The main purpose behind this is to boost the reserves of the subsidiary prior of the subsidiary making a dividend in specie of properties to the holding company. Prior to the dividend there will also have been a capital reduction to turn the share premium account into distributable reserves. I am aware of the requirements and procedures for the capital reduction and the dividend in specie but is there any procedure to be undertaken in relation to the write off ( eg does the issue have to be put to members) or can this be done by a decision of the directors?
According to s630 of the Companies Act, rights attaching to a class of shares may be changed provided the requirements are met. Can rights be changed to some only shares in a class and be redesignated a different class with different rights? E.g.: a company with 13 ordinary shares allotted, I want to make 2 of those ordinary shares only (held by one member), non-voting shares, could this be done by changing the rights attaching to those 2 shares only, with the consent of all members?
If a private limited company with one class of share with full rights to voting, capital and distributions changes to having two classes of share with the new class of share having rights to dividend only, does the company have to include the specific details of the rights attached to each class of share in the Articles of Association in order for them to be enforceable? If the rights attached to the share classes are not included in the Articles are the shares regarded as pari passu?
I am currently dealing with a reorganisation of group companies. I am striking off one of the companies but note that it has a reserve made up of 'retained earnings'. Would I need to follow the same process to reduce / cancel the reserve as I would a capital reserve account (i.e solvency statements etc) in order to create distributable reserves and thus declare a dividend to the sole shareholder?
On the death of a shareholder the shares pass automatically to his personal representative. But what rights, if any, does an executor have before probate has been granted? Can they vote? Can they appoint a proxy? Also can a company register the PR as a member before probate has been granted?
A private company limited by shares and incorporated in the UK (UKCO) has only two existing shareholders and ordinary shares. Can each of UKCO's two existing shareholders pass a written resolution for UKCO to buyback and cancel each of their shares under a contingent purchase contract (section 694(3) Companies Act 2006) on the condition that new shareholders are first issued and allotted shares in UKCO (the "Effective Time" will follow the entry of the new shareholders into UKCO's register of members)?
I am instructed in relation to a company purchase of own shares. I am aware that the purchase price needs to be settled in cash on completion of the buyback. The buyback will be out of distributable reserves. The selling shareholder owes the company money on his directors' loan account - do you see any issue with the buyback agreement providing for a proportion of the purchase price to be settled by discharge of the outstanding loan account / applied by the company (at the vendor's direction) in repayment of the loan, rather than the company physically paying the cash over to the shareholder and the shareholder being under an obligation to immediately pay that cash back to the company in repayment of his loan? Also, the company has agreed that the shareholder can keep a company vehicle used by him upon him exiting as a shareholder, director and employee. This is effectively being gifted but I am wondering whether it should instead perhaps be sold at at least book value so that it is not seen as forming non-cash consideration for the buy back with the book value being added to the amount of the share buy back price and this amount then being paid to the company for the vehicle as a separate transaction immediately following the buy back. Again, is there any need for a physical movement of cash or can we simply provide that the selling shareholder perhaps directs that the company retain £x of the buy back price to satisfy the vehicle purchase price (in the same way
As a result of The Companies Act 2006 (Amendment of Part 18) Regulations 2013 can a company buy back shares from cash if their Articles of Association authorise the Company to 'make a payment in respect of the redemption or purchase of any of its own shares as authorised by these articles otherwise than out of distributable profits of the Company or the proceeds of a fresh issue of shares.' These Articles date before the amendment.
Is the fact that a shareholder is referred to as nominee for the majority shareholder on a stock transfer form and board minute conclusive of its status as a nominee shareholder or is a trust or nominee arrangement/document required? We have a situation where a shareholder with one share is trying to argue that the one share was held as nominee and it relies on a reference to it as 'nominee' in a stock transfer form, however, we believe that it is common practice for a minority shareholder to be referred to as nominee but not in the strict sense of the word.
Where a private company has undertaken a capital reduction using the solvency statement procedure and the resolution states that the capital will be repaid to the shareholders upon registration at Companies House, do all the shareholders have to be paid back immediately and at the same time? I cannot find anything regarding process following registration.
My question relates to this paragraph: "The 2006 Act provides that any amendment to, or insertion of, a variation of class rights provision in the articles is to be treated as a variation of those rights (sections 630(5) and 631(5)). Such an amendment would require the variation of class rights procedure (see below) to be followed in addition to the sanction of a special resolution under section 21 or any more restrictive requirements as are set out in the articles. There are concerns about the implications of section 22 (Entrenched provisions of the articles) on the insertion of a variation of class rights provision. For further details see Entrenchment below." My question is - if a provision is added to a company's articles which provides for certain shares to automatically be converted in to a different class of shares (with different dividend, voting and capital rights) on the occurrence of a trigger event, does form SH10 have to be filed at Companies House at the date the provision is added to the articles (because of S630(5) CA 2006) as well as on the date on which the conversion takes place?
What are the approval requirements in the event that a company wishes to appoint a representative to attend an extraordinary / annual general meeting of its wholly owned subsidiary? Does such an appointment require full board approval of the parent or just 2 directors? Will this vary depending upon the nature of the matters to be approved at the meeting?
As I understand it, a [private company limited by shares] incorporated prior to 1 October 2009 which adopted Table A, would still have Table A articles, is this correct? And if so, can you tell me what the authority is for Table A still applying, given that the old Companies Act (and presumably Table A) has been revoked?
My company is a small company where all the directors are shareholders with equal shareholding. We recently held an AGM, where several matters outside the ordinary business of an AGM were discussed and without prior notice of it. These decisions were reached unanimously. What weight do they carry in this light. Please use 1985 CA to advise.
What is the effect, if any, of typographical errors in a company's articles of association? For example, if the articles state that the company was incorporated on a certain date, but it was in fact incorporated two days later (or earlier)?
In your article entitled "Quorum requirements: comparison between the Companies Acts 2006 and 1985", you state that "in the case of single member companies, one qualifying person present at a meeting is a quorum". Please could you clarify whether the meeting that you refer to is an AGM or an EGM. In addition, if the meeting referred to is an AGM, can the meeting be called by a single Director?
I have a question regarding companies limited by guarantee (CLG). One of my clients is interested in incorporation a CLG however he has indicated that the member does not wish to have his name shown on the Register of Members. Is it possible for a member to request that another persons name be entered in to the Register in a nominee capacity? Will a declaration of trust suffice in this case?
Our company used to be registered as a plc up until it became a private company in 2006 via a scheme of arrangement. There are a large number of dividends that were declared before 2006 that have not been cashed (payment was made by cheque), despite efforts being made to track down the shareholder. Some of the dividends were declared over 12 years ago. A large number of dividend payments made as part of the scheme of arrangement in 2006 have also been uncashed. I understand that after 12 years the company is able to declare the dividend void and it becomes owner of such money. Up until the 12 year period the company is usually also permitted to invest such funds as it so fits. My question is though - does the 2006 scheme of arrangement alter the position described above?
In circumstances where a company has undertaken participation in disclosable tax schemes which are being challenged by HMRC and has been informed by the tax scheme provider that they have advice that the chances of success of the challenge by HMRC are unlikely and that they do not need to provide for it in their accounts. Would the directors be entitled to view the claim remote enough to not consider the potential claim in determining whether or not to make a distribution to shareholders. Does the fact that the legal advice as regards chances of success is not personal to them risk them being sanctioned for putting assets beyond creditors should the HMRC claim be successful?
A company we are acting for entered into a conditional/contingent share buy back contract a few months ago. The contract was approved by the members. The company has since passed a resolution sub-dividing the shares. Does the sub-division amount to a variation of the original contract which requires approval in accordance with s697 CA 2006? None of the other terms of the contract have been changed.
As treasury shares can now be held by private companies, should the paragraph under the heading "statutory pre-emption rights" in practice note, Treasury shares be updated to also refer to section 567 CA 2006? i.e. an exclusion of statutory pre-emption provision in the articles pursuant to s.567 CA 2006 can also be drafted to cover the sale of shares out of treasury as well as the allotment of new shares. Also, do you think that any such provision in the articles should expressly refer to the sale of treasury shares or is reference to "equity securities" as in section 560 CA 2006 sufficient? ie is the wording below in caps necessary? "In accordance with section 567(1) of the CA 2006, sections 561 and 562 of the CA 2006 shall not apply to an allotment of equity securities (within the meaning of section 560 of CA 2006) by the Company OR, FOR THE AVOIDANCE OF DOUBT, TO A SALE OF ORDINARY SHARES IN THE COMPANY THAT IMMEDIATELY BEFORE THE SALE WERE HELD BY THE COMPANY AS TREASURY SHARES."
We have a company who wishes to buy back shares. The Seller wants a potential deferred payment calculated by reference to the dividends it would have received had it remained a shareholder. s691(2) CA2006 would prevent this so we have considered either a separate redeemable non-voting class of share being issued to the seller entitling it solely to dividends or alternatively, the remaining shareholders personally agreeing to pay this amount to the seller (on the basis that they will have the benefit of the increased dividend in any event) although the tax position will need to be considered. We wondered though if there was any other methodology you had come across.
With regard to a reduction of share capital for a private limited company, using the solvency statement procedure, can I please clarify one point in relation to section 641 (2) of the Companies Act 2006? If a private limited company has an issued share capital of, say, 100 ordinary shares (and has no other class of share), and wishes to reduce that figure from 100 to 50 ordinary shares, what role does 641 (2) play, if any? My understanding is that it would not as the example described above relates to ordinary shares only. Thanks.
The company has previously issued redeemable preference shares to an affiliate. Those were issued at a premium, which is partly-paid, to the nominal value of each share. Is it possible and what are the requirements for partial repayment of premium paid up on the redeemable preference shares (without cancelling / redeeming the shares)?
I would be most grateful if you would provide your thoughts on what the situation would be if: (1) on applying to register a (2006 Act) company as a company limited by guarantee, the applicant failed to provide a memorandum of association; and (2) Companies House did not spot this omission and proceeded to incorporate the Company. I understand that Companies House would not accept a new replacement memorandum. Please could you provide your thoughts on whether (1) the established Company in question would be validly incorporated and would not need to take any further action as it would have a certificate of registration; or if (2) the company would need to take action to rectify the situation (for example by incorporating a new company to which it could transfer the name and assets of the original company)? Many thanks for your help.
We have a company incorporated under the 1985 to 1989, Tables A to F, as amended and would like to take advantage of the relaxation in CA 2006. Please can you provide procedure and resolution to adopt this?
Commercial agreement has been reached where shares reflecting 10% in the capital of a company are to be issued to a group of individuals. These shares will be a different class (B Shares) to the other 90% of shares in the capital of the company (A Shares). They will rank pari passu in all respects, save that the first £60,000 of any dividends declared will be paid solely across the B Shares, the first 300k arising from any sale of the company (or its assets) will be paid to the holders of the B Shares (with any remaining funds divided proportionately amongst the A Shares and B Shares. Is it possible to put this in place? Would it all be contained in the articles of association?
I am preparing a dividend in specie between subsidiary and holding company in respect of a debt owed to the subsidiary. My question is as well as normal resolution and board minutes re dividend in specie, should a deed of novation be entered into to formally transfer the debt owed?
If a client wishes to reclassify some existing shares from A to B with both classes already in existence, do we have to file a resolution at Companies House now we no longer need to have issued share capital?
A subsidiary company is proposing to transfer various assets to its parent by a dividend in specie. One of the assets to be transferred is intellectual property rights (IPR) which currently do not have a book value (they consist of copyright in technical drawings and technical know how). Do you consider that it would be necessary to attribute a value to the IPR (a) on the balance sheet of the subsidiary before declaring the dividend and/or (b) on the balance sheet of the parent on receipt of the dividend?
I am looking at a proposed Dividend in Specie by a Holding Company (Topco) which has a wholly owned Subsidiary (Subsidiary) which in turn has a wholly owned subsidiary (Sub-Subsidiary). Can the assets distributed under the Dividend in Specie by Topco be the shares in Sub-Subsidiary or do the assets have to be owned directly by Topco when the dividend is declared?
There is a group of private companies which comprises as follows: company A (not a UK company) wholly owns company B (incorporated in England and Wales), company B wholly owns company C (incorporated in England and Wales), company C wholly owns company D (incorporated in England and Wales) and company D wholly owns company E (incorporated in England and Wales). Company A owes company E, a loan in the region of £2million (the “Loan”). The proposal is to declare dividends ‘up the chain’ from company E to company A so that ultimately company A can then repay the/part of the Loan. The question is whether it is possible for companies E, D, C and B to declare cash dividends but to not transfer cash to their immediate parent, and instead have letters of direction (or a composite deed in place between the companies) in place which ultimately direct that E set off the amount equivalent to the proposed dividend received by A against the amount under the Loan (on the basis that E would declare a final dividend to D, who would direct E to pay such amount to C, on D’s behalf, to satisfy the proposed dividend by D to C, with C then directing D to pay such amount to B to satisfy its proposed dividend to B etc. and so forth up the chain). When it gets to company B declaring a dividend to company A, company A would direct company B to direct company C to direct company D to direct company E to utilise that amount that was to ultimately be paid by E to A (in accordance wi
Is it possible to include a provision in a Company's articles that prohibits one class of shares from selling their shares to anyone else other than a shareholder from another class (i.e. they can't sell to a third party and have to sell to another existing shareholder of the Company)?
I would be grateful if you could help us with a query relating to industrial and provident societies. Where a company converts to an industrial and provident society under the Industrial and Provident Societies Act 1965, are all of the company's contracts and leases automatically assigned to the new entity (i.e. by operation of law)? Or does the company need to assign its contracts and leases in writing to the new IPS? Section 53(7) of the 1965 Act states that registration of a company as an IPS does not affect existing rights or claims against the company but does not specifically deal with the point. I have checked the various other statutes governing IPA's and the FSA's (the registering authority for IPSs) website but could not find anything relevant. If there is no authority on this point, please could you confirm what the fall back position is?
I have a client who is by far the major shareholder in a trading company. He intends to provide shares for key staff as follows. First, he will swap his shares in the trading company for A ordinary shares in a newco holding company. He will get 49% of the equity in newco. His shares will be non-dilutable. The shares will also carry certain privileges in terms of voting and other matters. The managers, for their efforts to date, will swap their existing nominal shareholding (and some share options) in the trading company for B ordinary shares. They will get 51% of the equity in newco. The managers class rights will be more limited, but they will be permitted to incentivise other new entrants by diluting their own equity i.e. diluting their own B ordinary shares. It is central to my role to get the drafting of the class rights correct. Can you provide any assistance on how I would go about recording the different equity value as between the A ordinary and the B ordinary shares? For example, it does not really matter if newco issues 100A ordinary or 490A Ordinary, so long as it is clear, that these shares will always represent, in aggregate, 49% of the overall equity of the company. I was not sure if you have some example drafting (or any ideas where to look). I imagine this is all best placed in the articles. But I am not sure I can find articles on PLC, which specifically cater for dilutable and non-dilutable shares, and stating what their respective equity values a
Section 29/30 of the CA06 requires a special resolution to be filed at Companies House, and section 283 defines a special resolution as resolution which requires at least 75%. My question is whether you have to file a resolution at Companies House which is required in your articles to be passed as a special resolution, but not under the CA06. I think that the CA06 requires this but on speaking with CH they say they only require copies of special resolutions that are required to be passed as special resolution under the CA.
We are advising a company that has issued A shares and B shares. The A shares were issued at a premium. Is it possible to carry out a reduction of share capital whereby: (a) the share premium account is reduced (with such amount being returned to the A shareholders) and (b) all of the A shares of the company are cancelled and the amount of such shares returned to the A shareholders. If this is possible, there will be an amount that remains credited to the share premium account. How would you show this amount in Form SH19 when filed given that the A shares no longer exist and it is those shares which previously carried the share premium?
I have read your Practice note, Treasury shares, and have the following query. We are an AIM listed PLC, and have recently been involved in an asset and share sale (as the seller) to a related party who is a majority shareholder. Part of the consideration payable to us is in the form of us conducting a share buy-back of all the shares of this shareholder, and retaining the proceeds of this buyback. The shares themselves will be held in treasury. In this scenario, do we require to complete an SH03 form and file at Companies House (as this is not the "conventional" share buy-back).
If the current auditors of a private company resign with effect from a specific date, do the company's new auditors need to be appointed with effect from that date or is a period of 3 weeks between the resignation and the appointment acceptable ?
Can you please advise whether I would be able to reduce the share capital of a private company with the following balance sheet. Would I only be able to reduce it by £4.5m as otherwise it would be insolvent. cash at bank 4.5m NET ASSETS: 4.5m share capital 10m Profit and loss (5.5m) shareholder funds: 4.5m
We have lost contact with a shareholder who previously verbally agreed to transfer their subscriber share but who has not signed a stock transfer form. The company in which the share is held contains little value but to wind it up would also require approval and signature by the current shareholders. Do you have any guidance that deals with the situation in which a company loses contact with a shareholder or on the implications of registering the transfer or winding up the company without their signature? Thank you.
Company X has 1985 memorandum and articles of association. The memorandum refers to an authorised share capital. Following the 2006 Act, that reference to an authorised capital is deemed to be part of the articles and can be altered by ordinary resolution. However, when I file the resolution with Companies House, do I need to file a copy of the amended memorandum (showing the amended capital) or the articles (which haven't changed; they don't mention the capital) or both or neither?
A UK company has a subsidiary overseas. All of the directors of both the UK parent and the overseas subsidiary are based in the UK (and are the same directors). If the directors are making business decisions etc in relation to the overseas company from within the UK (i.e. at the UK parent company's office), could that be regarded as a place of business for the purposes of the Overseas Companies Regulations?
We have a client family company where one of the two shareholders wishes to retire and dispose of his shares (approx 48% of share capital). Their accountants have proposed that, although there are sufficient distributable reserves shown in the latest accounts, there is insufficient cash to finance all of the proposed buy back by the company. They have therefore suggested that two properties which are superfluous to the business be transferred to the outgoing shareholder in specie in satisfaction of the payment for such number of shares as equals the value of the properties. Clearly, this is not a payment 'in cash' but our query is whether this is a legal alternative under the CA 2006, or indeed if there is any other possible solution?
I am acting for the shareholders of a private company (X) who are selling their shares to YZ Limited (also a private company). The purchase price will be paid via a small cash injection by YZ Limited and the balance via a dividend to be declared and paid by X immediately following completion to YZ Limited who will then utilise this to pay the balance purchase money. It is anticipated that in practice this will all happen instantaneously. What considerations are there to look out for? One concern is that technically the dividend is due to the members on the register who at the point of it being paid will be the sellers; they do not want this to be treated as their income, presumably, as the beneficial interest in the shares will have been transferred, this will not be a problem? X has power to give financial assistance.
Section 424 CA 2006 requires that the accounts of a public company be sent to members at least 21 days before the relevant accounts meeting. It does not appear to indicate that this time period only refers to "clear days", and the requirement appears to be that the accounts should be 'sent' within this timescale (as opposed to a requirement that they be 'received by' members within such timescale). A company could therefore still comply with this requirement even if the accounts are sent out slightly later than the notice of AGM (provided that they are sent at least 21 days before the meeting). Are you aware of anything that would affect this requirement and do you agree with this interpretation?
When a private limited company reduces its share capital by the solvency statement procedure, is it only the issued share capital that is reduced or is the authorised share capital also reduced? Please assume that the board and shareholder resolutions facilitating the transaction do not specifically refer to reducing the company's issued or authorised share capital.
My client, a small private company, has 4 classes of shares. In a contract of employment, it gave some shares to an employee some years ago. Those shares have been valued and the employee, who has left the company, has agreed to sell the shares back to the company at the valuation given by the company accountant. The company paid the money for the shares and the seller (former employee) gave back her share certificate. The company has asked if there is any document (or contract) that should have been used. PLC refers to a share buy back contract. Is this necessary and, if so, what type of contract would be suitable for an employee selling back to the company shares she held? The articles permit the company to buy back shares.
Where a shareholder has contractually waived their voting rights in relation to the shares they hold in a company, are they still an "eligible member" of that company for the purposes of section 289 of the Companies Act 2006?
I have a situation where there is an off market buy back of shares in the company out of distributable profits. The shareholding being bought back is jointly held by Mr A and Mr B. Mr B also separately holds shares in the Company himself. Do you have a view as to whether or not Mr B is able to vote on the resolution approving the buy back agreement (in respect of the shares he holds himself) or does s.695 mean that is not able to?
I am converting redeemable shares into ordinary shares. They will be essentially exactly the same, although clearly no longer redeemable by the company. Do you think that this would constitute a variation of class rights, merely by the change of name?
If an unlisted public limited company was re-registered as a private limited company (with no change to the name other than plc to ltd), would the re-registration count as a change of name under the Companies Act 2006 and therefore mean that the directors would need to wait 3 months before submitting the strike off application?
Should draft minutes of an AGM meeting be read and validated by members of a small company before it is signed by the chairman. Should minutes of the last AGM be adopted at next AGM. How are AGM minutes verified before being signed.
I wonder if you can assist with a situation that is confusing me. A client company incorporated under the 1985 Companies Act wishes to make a charitable donation. The memo and articles (incorporating Table A) have not been amended since the introduction of the 2006 Companies Act, thus I am aware that the company will be restricted by the objects clauses contained in the memo, which do not include an express power for the company to make charitable donations. Can we pass a special resolution to amend the memo (which is incorporated into their articles under the 2006 Companies Act) and if so what are the filing requirements at Companies House- must we file the articles with the memo appended? Or is there a better, simpler way of giving them the right to make a charitable donation? I am aware we can remove the objects clause by special resolution (then the company would have unrestricted objects) but in doing so we would remove the limitation of liability and authorised share capital. Your help would be appreciated.
When performing a capital reduction with a direct payment to shareholders (no creation of a distributable reserve) does the company have to make the payment to the shareholders all at once or could some if it be left outstanding on a loan?
A private company has 500 A shares and 500 B Shares. The A and B shares have been created as part of a scheme to partition the business which has two separate activities. The B shareholder recognizes that his shares are worthless because his side of the business has no value and has resigned as Director and gifted them to the Company for no consideration. The A shareholder wishes to cancel them and wishes to pass a Special Resolution to extinguish the 500 B shares. He intends to use the Solvency Statement method and file form SH19. Unfortunately the A shares are only 50% of the share capital and not by themselves enough to pass a special resolution. Can a Private Company vote the B Shares to pass the Special resolution? Alternatively can the company give the shares to the A shareholder to vote them in order to pass the resolution. The A shareholder is the only Director and Shareholder left in the Company. Can we avoid issuing 1000 shares to him just to increase his shareholding to 75%?
I've just read this practice note http://corporate.practicallaw.com/1-386-4240#a797205 and just to confirm, the ordinary resolution to approve the buy-back contract does not need to be filed with Companies House? If a special resolution is passed in respect of the out of capital element then this will need to be filed.
We are dealing with a company that has two classes of shares, ordinary and preference shares, both in denominations of £1, in issue. Different rights attach to each class. We do not intend to increase or decrease the issued share capital or change the denominations of the shares. In that situation, is it possible to reclassify the preference shares as ordinary shares under s.630 Companies Act 2006?
Regulation 81 of Table A indicates the office of a director shall be vacated if he ceases to be a director by virtue of any provision of the Act...(Reg.81(a)). 'The Act' is defined at Reg.1 as the Companies Act 1985 including any statutory modification or re-enactment thereof. For companies still operating under Table A, does this now refer to the Companies Act 2006 or to the otherwise defunct Companies Act 1985?
We are changing the Articles of Association incorporating 1985 Act into ones based on the Model Articles for private companies with limited shares. We reduced the nominal value of our ordinary share from GBP1.00 each to GBP0.57 each but it was not reflected in our Memorandum. Do I understand correctly that if we change the Articles of Association then the Memorandum will be left unchanged as a result?
I'm advising a 1985 Act company limited by guarantee. I'm going to update their Articles (in fact create new ones based on the PLC model) and these will incorporate some of the objects originally set out in their old Memorandum. What's not entirely clear to me is whether in doing so I need also to disapply the old Memorandum. As I understand it by virtue of the 2006 Act those provisions in the old Memorandum now form part of the existing Articles. On this basis to replace the existing Articles would be to replace also the provisions imported into them from the old Memorandum. First, is this right? And secondly, would it be good practice to make it clear that, for example, the old objects clause no longer applied. And if so, how?
Is it possible to give a third party who is not a shareholder a right of veto in the articles so that: 1) the restricted objects cannot be changed without consent of the third party (and presumably this would be a right of entrenchment as it would be require more than a special resolution to change the articles) and 2) the shares cannot be transferred without consent of the third party (effectively giving a class right to a non member). I recall a case whereby a solicitor was given such a right but cannot find it on plc. The matter I am advising on involves different facts, but possibly the same principle.
Under s.318(2) a quorum is two "subject to the provisions of the company's articles". Can you see any reason why the articles should not provide for a quorum to be one? I am looking at a situation where there are two classes of shares - ordinary and non-voting preference shares. The wish is for there to be only one ordinary shareholder, but because of the other members holding preference shares the company will not be a single member company.
My colleague has drafted a Nominee shareholders declaration of trust using your template document. The client has queried what would happen on the death of the nominee. My first reaction is that as the nominee will be seen as the legal owner of the shares the articles will need to be considered to see what happens on the death of a shareholder. However it does not seem right that on the death of the nominee that those shares must be offered to all the shareholders pro rata (which would not include the beneficiary) or if the articles were silent that it would go to the nominee's estate. Could provisions be placed in the declaration of trust dealing with the possibility of the nominee's death allowing the shares to transfer to the beneficiary, or allow the beneficiary to appoint a new nominee, or will provisions need to be placed into the articles?
My questions relate to reduction of capital. To assist me in posing the questions I would like to refer to a fictional company which has an issued share capital of 100 ordinary shares of £1-00 each of which A holds 70, B holds 20 and C holds 9 and D holds 1. There is a share premium account of £100,000 and the company is considering a reduction of capital. My questions are as follows: 1. What is the linkage between the Share Premium Account and shares at law. By way of example is it possible to reduce the Share Premium Account by 50% without reducing the issued share capital by 50%, that is to say reduce the Share Premium Account by £50,000, repay that to the shareholders and leave 100 ordinary shares of £1-00 each in issue? 2. If there is a directly proportionate relationship between the issued share capital and the Share Premium Account, would it be lawful to re-designate the ordinary shares of £1-00 each to 10,000 ordinary shares of £0.01p each immediately before the capital reduction, reduce the issued share capital to 100 ordinary shares of £0.01p each and repay 99% of the Share Premium Account to the shareholders. 3. What is the relationship between the issued share capital and the impact of a share reduction - is it proportional? To use the above example if the share capital was reduced by 50%, would this mean a reduction in all holdings of %50? If that is the case, what would happen in relation to D who only holds one share and C who holds a number o
We act for a charitable company which is limited by guarantee. The Articles of Association are bespoke and were drafted under the Companies Act 1985. There is a general meeting scheduled for later on in the year, in which it is hoped the members will vote on changing/updating the articles of association. It is going to be very difficult for all members to attend physically, therefore I would like to know whether the general meeting can be held via telephone conference call? I have looked into section 360A of the CA 2006 which states that nothing in Part 13 of the CA 2006 (resolutions and meetings) precludes electronic meetings. The company's Articles of Association are silent on the issue of electronic meeting/voting; and I didn't know whether the articles had to explicitly permit this. I am aware that the CA 2006 model articles permit “virtual” attendance at meetings, under article 37 of the model articles for private companies limited by shares, but the company's articles do not contain such a permission.
A client is the sole member of a private limited company. It believed the company had been formed with 1p shares, of which 10,000 were issued and described in minutes, certificates, the transfer from the nominee subscriber etc as fully paid, although it does not appear anything was in fact paid to the company. In fact the shares were 1 shares so that there is a potential liability of 10,000. The sole member wishes to reduce that liability to 100 as originally intended. The only course seems to be to surrender 9,900 shares on the basis that the articles would permit forfeiture as a result of the non-payment. What does not seem clear is what the status of those shares is after the surrender. It does not appear that they are automatically cancelled or that there is any means for cancelling them - they seem to become the property of the company. Any thoughts would be welcome!
What would be the consequences to a third party where an individual with a power of attorney entererd into a contract with the third party ultra-vires of the power conferred on them? Would the third party (acting in good faith) have an enforceable contract against the donor, with the donor having recourse to the donee?
Is it possible for a proxy to sign a written resolution on behalf of his appointing shareholder? If so, does the written resolution need to be circulated to the shareholder who appointed the proxy and the proxy, or can it be circulated only to the proxy himself?
Can a company apply for voluntary strike off if it still has debts/creditors? I know that within 7 days of the making the application the application needs to be served on all interested parties. However I wondered if it is possible to avail yourself of strike off if the company has debts.
Some of the subsidiary companies in our group (all privately 100% owned) adopted Table A to the Companies Act 1985 but made the "usual" amendments, some of which refer to sections of the 1985 Act. Do the Articles remain valid notwithstanding that the 1985 Act has been replaced? If the Articles are updated with reference to the 2006 Act and should we wish to make modifications to the standard form articles, is it correct to refer to the Model Articles or Table A of the 2006 Act?
I have a client who incorporated their company online in 2010. At the time of incorporation they adopted the model articles without amendment. On the IN01 they stated the class of shares as "ORD A" and this has then been repeated on the subsequent annual return. The client can’t give any explanation for referring to the shares as anything but ordinary shares. It seems to me that there is an inconsistency in adopting the model articles but referring to ORD A shares. One of my tax colleagues is preparing an EMI scheme for the client and we would like to correct the naming of the shares, if at all possible, so that they are simple ordinary shares. I don’t think it would be correct to redesignate the shares as this would only take effect from the date of the redesignation. Is there a way to rectify the naming of the shares so that it takes effect from the incorporation of the company? I have looked at chapter 2 of the Registrar's Rules and Powers, but can't see that there is an appropriate procedure. Would it be possible to file a resolution rectifying the mistake with effect from incorporation and, if so, what other filings would be required?
Our client is a private company. A small number of its shareholders have been untraceable for many years and our client wishes to sell these shares and hold the consideration in trust until claimed by the untraceable shareholders. We see that other users have asked about dealing with untraceable shareholders and it has been suggested that the company articles are checked for a specific power of sale. Unfortunately, the articles in this case make no provision for dealing with untraceable shareholders. We have considered amending the articles now to confer this power on the company. However, as untraceable shareholders have already been identified, it will not be possible to notify and have them vote on the resolution to amend the articles conferring the power of sale. Can you advise if conferring a power of sale in the articles would be the best procedure to use in this case, notwithstanding that the company is already aware of untraceable shareholders who will not be contactable in order to vote on the change to the articles?
We have a company limited by guarantee which over time has built up profits. The company is considering being sold and the concern is to get the profits out of the company. The law seems to suggest that it cannot be distributed. Is there any other way the money can be taken out of the company?
When a company is restored under a bona vista waiver, are all the directors automatically reinstated? If so, is there any requirement to notify the former directors that they have now been reinstated? If the company is also a charity, is it's charitable status also reinstated?
Please could you advise on the validity of a memorandum of association of a company that was incorporated in 1985 and has since amended its articles of association (in 2011), but without reference to incorporating the registered memorandum. Is the memorandum still valid? Or, following the implementation of the 2006 Act, do the recently registered Articles necessarily over rule the memorandum and they are therefore now void?
I have a few queries regarding incorporating an existing charity as a company. Our client (a non-exempt charitable organisation) is preparing to become an incorporated company. As part of this change, the charity will need to transfer a number of its freehold properties over to the new company. Ideally, we want to simply transfer these assets over the the new company. However, I understand that there are restrictions on the transfer of property under S117 of the Charities Act 2011. We want to transfer assets as simply as possible, would it be possible to clarify this area of law and outline how our client could go about it? S119 CA 2011 is relevant but appears to be a long way round what first appeared to be a simple transfer.
We have a company which is a private company limited by shares (it is not a traded company). The articles refer to a requirement to hold an AGM on 21 clear days' notice, but there is nothing specifically stating the period during which an AGM must be held. The last AGM was held in October 2011 and the company has not yet sent out notice for its next AGM. What are the consequences of this? Is there any real risk in terms of liability for the directors or the company? What would you advise? Could this situation be solved by calling an AGM asap, to include a shareholders' resolution to ratify the directors' failure to call an AGM? Is this necessary?
My understanding is that, based on the Duomatic principle, one could also have a resolution by all the shareholders disapplying existing shareholders' rights of first refusal on a transfer of shares. Is that your understanding too?
Has your view changed on whether adopting new articles, without reference to the existing memorandum, will suffice to delete the provisions of that memorandum, which would otherwise form part of the company's articles from 1 October 2009? I have seen this done on several occasions and wonder about the validity?
If a company, incorporated pre-2009, chooses to pass a resolution to (a) remove all the provisions of its memorandum that were deemed to form part of its articles and (b) adopt new articles, when do the new articles take effect? Part of the effect of the resolution will be to remove the company's objects (although the resolution will usually not specifically refer to the objects). Section 31(2) requires a Form CC04 to be submitted to the registrar and it goes on to state that "the amendment is not effective until entry of that notice on the register". Does s31(2) therefore mean that the adoption of the new articles is not effective until the CC04 is registered or does s31(2) solely delay the removal of the objects clause? It would seem to me to be more logical to work on the assumption that s31(2) only delays the removal of the objects and that the other amendments take effect immediately on the passing of the special resolution. I would, however, be grateful for any thoughts you may have.
I was wondering whether you have any thoughts on whether it is possible to complete a Deed where it has not been possible to have all parties sign that Deed. The position my client is in is that a previous firm of solicitors drew a Shareholders' Agreement which was signed by 70 or so shareholders. This was done some years ago. The company has grown significantly and that Shareholders' Agreement now contains a number of provisions which are either no longer relevant or not ideal for their current plans. We have prepared a deed of termination and have counterparts with 67 or so shareholders signed. We have been unable to trace 3. Do you have any general suggestions as to our options here? I appreciate you cannot give tailored legal advice but it would be good to know whether we can terminate between the 67 or whether there is any sort of de minimis concept with regards to completing the deed.
If a shareholder enters into a power of attorney and a voting agreement with a third party unconnected to the company (and giving the third party unfettered discretion to vote how he/she wishes) in respect of voting rights to be exercised at a general meeting of the company, can the company through its (hostile) directors be compelled to acknowledge such a power of attorney and voting agreement?
It is usual for charities to have provisions in their articles that certain provisions cannot be changed without Charity Commission consent and also for new Academy Schools to have a provision that the articles in their entirety cannot be changed without Department for Education consent. These external consents impose additional restrictive procedures beyond a special resolution. Do these constitute entrenchment provisions?
We are acting for a company with five shareholders. One shareholder (A) is currently leaving and another shareholder (B) has given notice to leave. We are looking at funding the acquisition of A's shares by (1) repaying the premium that A paid on subscribing for his shares and (2) repaying the premium that two other shareholders (C and D) paid for their shares and then using that sum towards the purchase of A's shares. If we reduce the share premium account by way of a reduction of capital and create a reserve which can then be treated as a realised profit and distributed, presumably we would have to distribute it pro-rata between all the shareholders? However, is there anything to prevent us reducing the capital by simply repaying the amount of premium paid by A, C and D to them (as a repayment of paid-up share capital in excess of the Company's wants) without repaying B's premium (the fifth shareholder did not pay a premium)? It is, of course, possible that we will later repay B's premium as part of the arrangements for buying back his shares.
Under a Shareholders Agreement, I would like to provide that shareholders include in their wills a requirement that if any shares in the company are held at the shareholder's death, then the executors will hold them as nominee for the company and will act and vote in accordance with the company's instructions. Do you have a precedent will clause to that effect and indeed a suitable clause to go in the Shareholders Agreement?
I am aware that a transferee of shares does not become the legal owner of those shares until his name has been entered into the company's register of members. If the transferee's name were to be entered into the register of members before the stock transfer form has been stamped or adjudicated as exempt, presumably this may constitute an offence under s.17 of the Stamp Act 1891? However, would it affect the transferee's title to the shares? Would he still be the valid legal owner of the shares from the moment his name is entered on the register of members, despite the stock transfer form effecting the transfer not having been stamped?
Do you share the view that it is possible to circumvent pre-emption type provisions arising on a transfer of shares under the Articles of Association where all shareholders are in agreement and sign a waiver type document to that effect?
I was hoping you could direct me to an article which discusses “associates”/"associated companies" in the context of joint ventures. What is required for a legal entity to be considered “associated” with another entity? Does the Companies Act give a definition of associated entities?
I have a question regarding disapplication of pre-emption rights for share allotments pursuant to an employee share scheme. The Articles of the company in question have disapplied the statutory pre-emption rights under section 561 and 562 CA 2006, and alternative pre-emption rights have been incorporated into the Articles, but there is still an obligation to offer the shares to existing members in proportion to their existing holdings. These pre-emption rights need to be disapplied as the company is in the course of granting share options to its employees (so that there is no requirement for the shares to be offered round to existing members at the time of exercise of the option). I understand that there is no issue regarding authority to allot under section 549. My question is whether the disapplication of pre-emption rights for the shares to be allotted under the share option needs to be contained in a new set of Articles or whether it is competent to set this out in the text of the special resolution itself. The company has only recently adopted a new set of Articles so from an administrative perspective it would be easier to circulate a written resolution without having to circulate a copy of a new set of Articles as well.
A number of shares in our client were transferred to a new shareholder by an existing shareholder, however the transfer was in breach of the Articles of the Company. The transferor was also a director and so registered the share transfer in his capacity as a director, though without holding the requisite board meeting or making the other directors aware of the registration. We are currently pursuing a litigation case, but I am interested to know if there is a specific procedure that we need to go through to have the share transfer 'reversed' as it was not a valid transfer? The transferee will not be willing to sign a Stock Transfer Form, and therefore any thoughts would be much appreciated.
Where a Director is also a shareholder, can you legitimately put the same service address in the register of members as in the register of directors? There seems little point being able to protect the director through entering a service address under s.163 Companies Act if you then have to enter the residential address in the register of members?
We are currently considering ways to achieve a group re-organisation. One of the steps involves the transfer of the business and assets of a subsidiary to its parent. The transfer will be done at book value and the parent will assume all liabilities in connection with the business and assets transferred. One way of doing this is via a straight forward asset purchase agreement. We appreciate that as the transfer is at book value, it will be treated as a distribution in kind and the rules in s845 will apply. We also appreciate that it will be treated as a transfer at undervalue and so care has to be taken to deal with the issues you highlight in your practice note such as directors' duties, insolvency and fraud on creditors. Your practice note on demergers also suggests that the transfer could potentially be achieved by a direct dividend, ie subsidiary declares a dividend in specie of the business and assets. Given that the intention is for the parent to assume the liabilities of the business and asets to be distributed I have a number of queries as follows. 1. I assume that there will need to be an agreement between parent and subsidiary along the lines of an asset purchase agreement to deal with the mechanics of the transfer. Would this agreement usually be referred to in the members' resolution approving the dividend? 2. Is there any "best practice" regarding the wording used in the resolution ie is it preferable to state the amount of the dividend that is being d
Under the 2006 Companies Act, private companies no longer need AGMs. Meetings of members are called General Meetings where they are called to pass, say, an ordinary or special resolution. Where the company is incorporated before the 2006 Act came into force and its articles describe and require any meeting other than an AGM to be described as an EGM, does the latter still prevail over the 2006 Act description of the meeting?
In a members' voluntary liquidation of a private company where the whereabouts of some of the shareholders is not known, what procedure should be followed? In particular, is there any obligation to to try and trace those shareholders?
Are there any restrictions on a guarantee company removing from its constitution a prohibition on distributions to members if the company is not a charity and then subsequently making a distribution? To give an example, I have noted that a number of guarantee companies have provisions in their Articles (or, where they were incorporated before 2008, their memoranda of association) which state that the income and assets of the company must be applied solely in promoting its objects and no portion may be transferred directly or indirectly to its members whether as dividend or otherwise. They usually further provide that on a winding up, any surplus assets must be transferred to a body with similar objects and having similar restrictions on the application of assets and income. However, many of these companies are not registered charities. There would therefore seem to be no obvious reason why the constitution could not be amended to change the entitlement of members to receive a distribution on winding up. Are you aware of any restrictions which could apply?
A private limited company with only one acting director filed for strike-off (DS01) in September 2012 because it was struggling financially. The company has now been dissolved. The company had stopped trading in January 2012. This meant it did not pay rent in regard to the lease for its office from January 2012 to September 2012. When the director filed the DS01, a copy of the application was not given to the creditor (landlord) in accordance with s.1006(1)(c) CA 2006. I am aware that this means the director is potentially guilty of an offence under s.1006(4) CA 2006. In your article [Practice note, Company dissolution: voluntary strike-off], you state that when a company is dissolved "all property and rights vested in... the company immediately before its dissolution (including leasehold property) are deemed to be bona vacantia and pass to the Crown". Can you please clarify what the implications of this are in regard to the lease and the company's obligations under the lease to the landlord? Is it correct that the debt would cease to apply once dissolution takes effect? I am aware that the creditor could apply for restoration of the company as the correct notification procedure was not followed. Assuming the landlord does not apply for restoration, is it possible for the landlord to recover the debt from the director personally? An important point to note is that the company's extremely limited remaining assets (around £1,000) were kept by the director (as
According to your note on company records, "records of meetings held before 1 October 2007 should be kept indefinitely, as the requirement to retain records under section 382 has no limit in the same way that section 248 of the 2006 Act does". Could you possibly direct me to anything that explains how this applies where companies have been dissolved prior to 1st October 2007? Particularly where they have been dissolved for a long time, how/where should the records be kept?
Company A and Company B are in the same group. Company A is looking to transfer certain assets to B at book value but A does not have positive reserves. A and B plan to write off an inter company loan between them which is intended to create distributable reserves in A and thus permit the intra group transfer at book value. Would the loan write off create distributable reserves?
I am looking at an intra-group situation where a subordinated loan from Subsidiary A to Subsidiary B will be repaid. Subsidiary A is a private company and a wholly owned subsidiary of HoldCo (public company). I understand that under s.654 of the Companies Act 2006 and The Companies (Reduction of Share Capital) Order 2008 it is possible to reduce share capital by a solvency statement, that the resulting reserve is treated as a realised profit and that realised profits are distributable by means of a dividend. What I am less clear on is how s654 interacts with s829(2)(b) of the 2006 Act which says that repayment of paid-up share capital is not a distribution under Part 23 of the Act. Essentially, I am looking at a way to create a distribution from Subsidary A to HoldCo in order that HoldCo can make a distribution to its shareholders.
I am advising a company with 1 ordinary shares and 1 preference shares. The preference shares have no conversion rights. Is it possible to convert a specified number of issued prefs into the same number of ords otherwise than by inserting into the articles a general right to convert? Is it possible for instance to simply approve a conversion of specific prefs by a special resolution of the holders of the prefs? Is it also the case that the term "redesignation" simply refers to the assigning of a new name to an entire class of share? I assume it would not be possible to "convert" prefs to ords by redesignation.
A new company (Newco) has been set up to acquire the entire issued share capital of a target company (Target) by way of a share for share exchange with the owners of Target. Newco's shares have been issued to the owners of Target at a premium. Under section 612 of the Companies Act 2006, Newco intends to claim merger relief from the requirement to set up a share premium account. Please confirm that the Form SH01 does not need to show any details of the share premium, and that the premium can instead be credited to a "merger reserve".
Some clients of mine are setting up a JV that they will hold 98% of shares and two other individuals will hold 1 % each. One of the individuals used an agent to form the company but gave the agent the wrong name for my client. They are proposing to remedy the situation by filing an Annual Return immediately with the correct name of my client. Assumming the person who made the mistake writes a letter explaining the error I had thought this would be ok but now am thinking there could be problems. Have you ever come across this? I would be grateful for any thoughts you may have.
Is a UK establishment (an overseas branch) a legal person? Can the branch enter into contracts? For example, leases etc.? Or must these all be done by the overseas company? I suppose the Permanent Representative (if given the relevant powers) could sign the documents on behalf of the overseas company.
I am updating the constitution (articles of association) of a company limited by guarantee which is a charity I have looked on PLC and wanted to check the following 2 points: 1 Our client wants to permit the members to elect other members rather than have the directors approve the new members. The members do not mind the directors administrating the process but do not want them to prevent a person becoming a member if they have been elected by the other members. Is this possible? I assume "yes" because this is a contractual arrangement between the members and the company limited by guarantee. Please can you direct me to any PLC information which confirms this right of the members to elect other members? All I could find was the document entitled "Companies limited by guarantee" under the section "Membership of guarantee company" states that: "The model articles for private companies limited by guarantee require each member to be approved by the directors and for prospective members to fill out a membership application form (article 21). An application form may be better than relying on the signature in a register of members, particularly where there is a substantial membership. The articles may provide for an enrolment fee to be paid on joining and/or an ongoing membership fee payable at regular intervals. Such membership fees may be a useful way to generate income. Unlike a company limited by shares, a company limited by guarantee is not under an obligation to iss
I would be interested if you have any info or thoughts on a scenario where a company issues shares to employees on the basis of a letter which provides that if the employee leaves before x years have elapsed a proportion of the shares that were issued to him will become forfeit. It seems to me that one might equate the requirement to work for x years to be part of the consideration and therefore if the employee leaves before the expiry of x years there is a failure to pay the consideration and therefore the shares can be forfeited. In some scenarios I have seen the above combined with a requirement to transfer shares to Shareholders x and y if the employee does not work for the x years but this can be difficult to enforce unless one also takes a power of attorney or other authority to execute a transfer on behalf of the exiting employee. Any thoughts you might have on this would be much appreciated.
I act for a corporate client who is considering registering a transfer of shares from a deceased shareholder to her husband, without evidence of a grant of probate. I have had sight of the will, and the husband is both executor and beneficiary but as the wife had very few assets (only the shares I am told), the husband is minded to not spend the time or expense of obtaining a grant of probate. Could you please point me in the direction of information regarding issues which the company should bear in mind if it accepts and registers such a transfer? The transfer is permitted under the articles without going through any pre-emption rights or anything similar to that. I really just need to know whether the registration would in theory be open to challenge and what the potential liability of the company would be in this regard. For example, could the transfer be set aside? Is there any circumstance in which any IHT liability or similar could end up with the company? Are there any consideration regarding accepting the transfer in good faith which we now cannot rely upon knowing that a grant of probate would be preferable? I look forward to hearing from you.
I wondered if you could provide some guidance. Under the Companies (Trading Disclosures) Regulations 2008 I understand that: - Business letters (whether in hard copy, electronic or any other form); - Order forms (whether in hard copy, electronic or any other form); and - Websites must display (among other things) the registered name and office of the limited company. I also understand that categorisation of a communication (as a business letter, order, invoice, etc.) depends not on its format, (e-mail, compliments slip, business card, etc.) but on its content, so that, for example, an e-mail or compliments slip could be a business letter for the purposes of the Regulations. I would consider that a physical business card that is handed out to business contacts at meetings would not in and of itself be considered a business letter. As such I would think that such business cards could display just the registered name of the company, without the requirement for a registered address. Is this a correct assumption?
I have a query about a mutiple completion buyback contract - i.e. a single unconditional contract for the sale of all of the Vendor's shares but with completion occurring on successive dates. My query is threefold:- 1. Whether or not this transaction is permissable under Company law and if so, whether my analysis of the legal and tax implications are correct thereof. 2. What cash and profits requirements apply to this proposal. 3. Do you have a precedent agreement? Dealing with points 1 and 2:- 1. My analysis of the legal and tax implications of the single contract with multiple completions in relation to the requirements of company law and sections 1033 – 1047 CTA 2010 is set out below:- (a) The 2006 Companies Act prohibits a buyback with payment of the consideration in instalments. However, where the buyback is effected by a single unconditional contract under which a vendor disposes of his beneficial interests in full at the outset, but with completion taking place on different dates in respect of different tranches of shares, there is no infringement of the provisions of the Companies Act. (b) By entering into an unconditional contract for the disposal of shares the vendor disposes of his entire beneficial interest in the shares subject to that contract. There will be a specific term in the contract which provides that the vendor relinquishes his rights as shareholder in relation to the shares sold on completion, notwithstanding the fact that completion take
I was wondering whether a shareholder is able to make an irrevocable proxy appointment in a written document, such as a shareholders' agreement or simple deed, rather than a proxy form on a meeting-by-meeting basis.
If a limited company has special articles in place which require an AGM to be heald yearly and the AGM has not been held within the time frame required: 1. What problems are created by the company not having done what the exiting M & A’s say should be done (from the point of view of the directors and the members) and what would the directors and members have to do in respect of this, firstly to rectify it and secondly what would any directors or shareholders have to do to challenge the fact that no AGM has taken place? 2. What are the sanctions that could be inflicted on the company? 3. Who could be affected by such sanction/action?
I have an unusual query in relation to the appointment of new directors in a Private Limited Company limited by shares where the sole director and shareholder has died. Other members of our firm have been appointed as Executors under the deceased’s Will. The Company was incorporated under the Companies Act 1948 and has bespoke Articles (i.e. the Regulations in Part 1 of Table A of the First Schedule to the Act are excluded except where they are expressly stated to apply). Under the Articles it states that the Directors of the Company shall not be less than two. It would appear that the Company has been operating for some time in express contravention to the Articles, however it is also now in breach of the Companies Act 2006, as there must be at least one director who is a natural person. I understand that the deceased’s shares will automatically pass to the Personal Representatives, who are not required to register as members in their own right prior to any transfer to the beneficiaries (albeit any transfer will be subject to the restrictions in the Articles). Unfortunately this appears to be a catch 22 situation, since there is no Board at which a director can be appointed and there is no director to call, give notice etc of a General Meeting (GM) at which an ordinary resolution can be passed. However, the Articles expressly include Regulation 49 which states that an GM may be requisitioned by any two members of the Company. This use to be governed by s.
Regarding a private limited company limited by shares (incorporated under Companies Act 2006) with model articles. The sole director resolved at a board meeting to allot shares, despite the quorum requirement not being met. I appreciate that under the model articles the director can usually only act for the purpose of appointing further directors or calling a general meeting so that shareholders may appoint further directors, and all other proceedings are usually invalid. The cheque for the shares has been paid into the company’s bank account. The resolution at the board meeting was invalid due to the meeting being inquorate, but is the share allotment still invalid, in light of the payment taken? At what point does "allotment" actually take place? When specifically does the shareholder acquire the "unconditional right" to be entered in the company’s register of members as holder of share(s)? Is it the case that, under the model articles, the company will either have to appoint further directors and hold a properly quorate board meeting to resolve the share allotments, or amend the articles to remove the quorum requirement?
I am looking at a share buy back by a private company from distributable profits. The accountants/tax advisers have applied for and obtained tax clearance from HMRC agreeing largely capital treatment for the sale proceeds. They have also prepared a draft sale and purchase agreement as a single contract providing for multiple completions of purchases of tranches of the shares over a ten year period ie it is effectively a phased purchase arrangement. We have been retained to draw up security for the seller in the form of a second charge which will rank after the company's bank. The draft contract states in terms that beneficial ownership of the shares will transfer to the company on execution of the contract and the vendor will lose any share rights (dividends, distributions, votes etc) immediately notwithstanding that Completion of the sale and purchase of the various tranches of shares does not take place until the dates specified in the table of completions over the 10 year period. I am concerned this arrangement could fall foul of S 691(2) CA 2006 and risk the contract being void or illegal with unfortunate consequences. I have suggested that a way round the problem would be for the whole of the purchase consideration to be paid up front and then the bulk of it loaned back to the company by the vendor and repaid over the deferred period; this would certainly facilitate a clearer security arrangement from the vendor's point of view. However, I am told this would
I understand that a power of attorney can be drafted as irrevocable if it is given by way of a security. Are there no other instances where a power of attorney can be irrevocable? Specifically, I am exploring the possibility of using a general power of attorney in a corporate transaction between a donor and a donee to enforce an obligation on a third party to the donor (rather than the donee). The donor and the third party have entered into a standby letter of credit, and the donee of the power of attorney must be able to irreovably enforce the donor's rights under the standby letter of credit. The donee is not a party to the standby letter of credit and therefore I do not think section 4 POAA 1971 will apply, as the power of attorney would not be to secure the performance of an obligation to the donee (rather, it is to secure the performance of an obligation on the third party to the donor). There is a prohibition on the assignment of the standby letter of credit and therefore the seller of the shares cannot assign its rights in the agreement to the donee bank. I am quite sure that it is not possible to have an irrevocable power of attorney on these terms, but please confirm that my understanding is correct.
I am currently advising on a share buyback. The company does not have sufficient distributable profits to purchase all the shares and the advising accountant is proposing an “unconditional contract with multiple completions”. These future completions would be subject to distributable profits being available. Consequently, I have two concerns: 1) Would the Company entering into such a contract breach the Companies Act provisions in respect of a purchase being out of distributable profits and paid for in full at the time of purchase? 2) If such a contract would not breach the Companies Act, I understand that it would involve the seller disposing of his entire beneficial interest in the shares and no longer being able to exercise any rights in respect of those shares. If the company did not then have the funds to purchase the shares at the proposed completion date, presumably they remain in “limbo” until such time as the company does have such funds? What is would the technical position be? The shares would exist at Companies House, but not, in practical terms be available for sale or other transfer, and even if so, they would have no value as only legal and not beneficial ownership remained. I should be grateful for any guidance you may be able to offer on the above.
Is there any requirement for a company to keep a hard copy of its compulsory records (register of members and directors, register of charges, service contracts etc) at the registered office or SAIL address, or would it be permissible for the company to maintain only an electronic record, and to print off a hard copy for any person who wishes to inspect the records?
I am acting for a company that has previously received a loan from a shareholder. The loan remains outstanding in full. It has now been agreed to convert the loan into ordinary shares, the conversion price for which has been agreed by all interested parties. What is the correct procedure for achieving this? Is it sufficient simply to pass a shareholder resolution stating, say, that the loan of £x be converted into y ordinary shares of £1 each. If this is correct, have the shares been allotted for cash or non-cash consideration, as this is relevant when completing Form SH01? I'd be very interested in your views.
The practice note (Payment for shares: timing and form) suggests it may be possible to offset amounts due to a shareholder for the purchase of his shares in a buyback against amounts owed by the shareholder to the company. I have reviewed the case (BDG Roof-Bond) and Park J's view clearly seems to allow for set-off provided that the full (pre set-off) purchase price is recorded in the contract. However, Tolley's refers to this case but notes that the prevalent view is that payment must mean cash and that the cash must be paid in full at completion. Is there anything further on this question? I am pursuing a buyback from a reluctant shareholder using a forced transfer provision in the articles (deemed transfer notice (no doubt) followed by agreed price or company accountants' valuation at the transferor’s cost). The company is instructing the accountant to value and will be looking to offset this cost (plus certain other undisputed sums owed by the shareholder to the company) against the price payable for the shares. Is this permissible?
If a person holds shares as nominee for a beneficiary in a limited company and subject to there being no decleration of trust, do they owe a fiduciary duty to vote in the best interests of the beneficiary or are they able to vote as they wish?
I was wondering if you could help me with a query about the transfer of shares in a company on death of a shareholder? I need to find out how to transfer shares in a company on the death of a shareholder to a specified person (e.g. to a shareholder's child). Can this be dealt with by amending the articles (and if so, how would this be done?) or would a separate shareholders' agreement have to be drafted to deal with this point? Any advice that could be given on this point would be much appreciated.
I have a quick query regarding the filing of special resolutions with the Registrar of Companies. My previous understanding was that all special resolutions were required to be filed with the Registrar of Companies but from reading this article in conjunction with the Companies Act 2006 it appears that it's only specific special resolutions which have to be filed - is this correct? I'm wondering whether a special resolution (which is required only because of a provision in the articles and would be an ordinary resolution by law) is required to be filed with the Registrar of Companies. If my presumption in the paragraph above is correct, then the resolution would not be required to be filed.
I am wondering if I could have your thoughts on the following. I act for a company. Last year (before I began acting!), a shareholder left the company (it was not a happy departure). Before leaving, he executed a stock transfer form transferring the shares held by him in the company to the company for "nil" consideration. My understanding is that this would fall within section 659(1) of the Companies Act 2006: the company has acquired its own fully paid up shares otherwise than for valuable consideration. Assuming this to be correct, then I am unclear as to what notices should have been given to Companies House, etc. as presumably the shares acquired by the company are now cancelled and this should be recorded. However the requirement for a return to be made to Companies House under section 707, CA 2006 relates only to purchases made pursuant to "this chapter". Section 659 does not fall within "this chapter".
I have been asked about a company that has no assets, ceased trading 6 months ago, and has filed a form DSO1 at Companies House asking to be struck off pursuant to section 1003 Companies Act 2006. I have been asked: 1. what happens to the statutory books (eg the legally required register of members, register of directors and board minutes), and any accounting records (defined in section 386 Companies Act 2006); and 2. for how long should such items be kept after dissolution. Is there a legal definition of statutory books as I cannot find one; as far as I know there is no legal requirement to have a register of allotments, or a register of transfers ? I have indicated the statutory books and accounting records are technically bona vacantia (section 1012 Companies Act 2006), but need not be forwarded to the Treasury Solicitor as they have no value. Do all, or only some, of the statutory books and accounting records have to be kept for a certain period after dissolution ? eg I have found no provision regarding keeping the register of members. eg Section 248 Companies Act 2006 states minutes of directors meetings must be kept 10 years. Does this apply after dissolution ? eg Section 388 Companies Act 2006 states accounting records must be kept 3 years. Does this apply after dissolution?
Do shareholders have a right to review / inspect board meeting minutes?(I note that the Companies Act is silent on the issue and I could not find any case law.) Also, who else, if anyone, has a right to inspect the board minutes?
A private company (registered in England & Wales with Table A 1985 as amended at 2000) forfeited a number of shares belonging to a shareholder who had defaulted on payment. At the time of forfeiture (2009) the directors were planning to sell those shares to a new shareholder within a matter of months and the shares were held by the company pending disposal. The sale did not materialise. The company is still holding these forfeited shares. A number of questions arise: 1. How should the company reflect the position in its statement of capital? The shares have not been cancelled and there does not appear to be a mechanism for such cancellation ion the Companies Act 2006 in respect of private rather than public companies. Is the company the registered shareholder? 2. Can the shares be cancelled and if so under what process and how should this be recorded and then reported to Companies House? 3. If the remaining shareholders were hoping to sell the entire issued share capital of the company to a third party buyer, how might these shares be handled? If not cancelled, can they be transferred to the remaining shareholders or to the buyer, and if so, what form does the transfer take? Is this a transfer from the original shareholder to the new shareholder, executed by some person under the authority of the directors (Table A 1985 regulation 20), or a transfer from the company to the new shareholder (in which case it would appear that the company is holding its own shares). R
We are acting in a transaction where a company is to enter into a contract where it will be obliged to buy back (using distributable profits) a certain number of its shares over a period of three years in various tranches. (under S694(3)) The contract does not contain any conditions in terms of the buyback and the Company is obliged to purchase the share on the various dates set out in the contract. My question is: does the Board have to be satisfied that it has the distributable profits with which to buyback all of the shares on the day of execution of the contract or will (my belief) the board need to be happy that it has distributable reserves on each tranched buyback transaction? Your analysis would be appreciated.
The company wants to buyback shares. We wish to have an unconditional contract (for reasons of Entrepreneur's relief), but to stagger the payments by having several completions, e.g say 30% of shares being repurchased in 3 tranches of 10%. As long as each 10% is paid for at the time of each tranche completion, is this permitted?