We use a well known online records management database to manage our corporate entities. This database holds all of our statutory registers which we can download and print when required. The registered office for the majority of our subsidiaries is our head office, from where the database is maintained. We do also have another office in England and one in Scotland. Given the registers are all online, is there any requirement for us to put a SAIL in place for the companies registered at our other England office? I am of the opinion that if there was a demand to inspect the records then they could be downloaded and printed and therefore SAIL would be redundant. I understand SAIL must be for the same part of the UK, so we cannot have an English SAIL for Scottish registered companies. I believe that a minute book does not have to be kept at the registered office (not explicit under CA2006). Can the minute book of a Scottish registered company be kept in England. Do I need to notify Companies House of any change in location of the minute book?
If a shareholders' agreement contains pre-emption rights in favour of the other shareholders and those shareholders choose not to exercise their rights of pre-emption, can the shareholders' agreement state that, in the absence of the pre-emption rights being exercised by the other shareholders, the proposed transferor is prohibited from transferring the shares to anyone else (that is, can the shareholders' agreement completely fetter the transferor's ability to sell to a third party purchaser)?
When affecting a buyback of shares out of capital under Part 18 of the Companies Act 2006, section 714 states that there must be an auditor's report given. Do the auditors who make this report need to be statutory auditors under Part 42 of the Act (auditors regulated by the Financial Reporting Council) or can accountants make this report in the case of a small company that does not normally have its accounts audited?
Under section 197 of the Companies Act 2006, can members approve a policy which allows for future loans to be made by a company (that is, can members approve a course of lending), or must each loan be approved separately?
Does a subsidiary granting a contingent value right to its parent in respect of the proceeds of future litigation constitute a distribution within the meaning of the Companies Act 2006, and therefore need to only be made from available profits?
If one is carrying out a capital reduction via solvency statement do we need to reduce authorised shares too? For example, the issued share capital is reduced from 100 to 1, so does the authorised capital also need to be decreased to 1?
I am currently preparing the documents required to incorporate a tenant's management company limited by guarantee. I have used the draft PLC articles in this respect, and was wondering what the position would be with the PSC register? The company will be incorporated with one individual as a member and two directors (one of whom is also the member). Both of these individuals are directors of the Developer. My initial thoughts were that the initial member would be a PSC pursuant to the second specified condition. I also thought that the Developer would be an RLE pursuant to the third specified condition as it can remove directors as per article 15. I appreciate that you cannot give specific legal advice, however, I would be grateful if you could let me know your thoughts regarding the query above.
How should a building society in an ownership chain be treated under the PSC regime? On incorporation, a company limited by guarantee will have a building society as its sole member. The building society is not an RLE, as it is not itself required to maintain a PSC register, it is not a DTR5 issuer, and it is not listed on one of the regulated markets specified in the PSC legislation. Therefore, it is necessary to "look through" the building society to see whether any individual or RLE has a "majority stake" in the society. The building society is a mutual society with all members having an equal right to vote at meetings. Therefore, none of its members will satisfy conditions 1 or 2 of the PSC regime. Assuming the society's constitution (or any other contractual document) does not give anyone the right to appoint/remove a majority of the board, and assuming that there is no-one else with significant influence or control over the society, it will not have any registrable PSCs or RLEs. Do you agree with this analysis?
When doing a confirmation statement for company A, if company B owned 40% of the shares and then company B became a friendly society under the industrial and provident societies, is it still to be registered as a relevant legal entity?
This scenario is very similar to that in the question: "Can a subsidiary hold shares in its parent if those shares were held before it became a subsidiary?" (dated 22 November 2012). Company A has held a 6% shareholding in Company B for 2 months. Company B now intends to purchase the entire issued share capital of Company A, meaning a subsidiary would own shares in its parent. Is this allowed, or if not, what happens?
I know that there were transitional provisions in place specifying that the objects, authorised share capital and, most importantly, statement of limitation on shareholder liability were deemed to form part of a companies' articles. If that company subsequently adopts new articles (in substitution for and to the exclusion of its existing ones) and those new articles do not contain the limitation of liability (either explicitly or by reference, say, to Model Article 2), then I'm assuming that there is no limit on shareholder liability (that is, the transitional provisions will not save the shareholders)?
If a company is a UK plc, but is not listed on a UK stock exchange (rather it is listed on NYSE or an EEA recognised investment exchange), can it carry out a share buyback using the simplified market purchase procedure (that is, which doesn't require a share buyback contract) or does section 693(5) of the CA 2006 mean that they could not use the market purchase procedure because they are listed on an overseas exchange?
Does an exempt charity (regulated by a government department) have sufficient capacity to be recorded as a shareholder, or should two thirds of the trustees of the charity be registered as joint shareholders?
My query is predominantly in two parts. By way of a summary of the background, I have a client that is a UK private company limited by shares ("UK co"). It is proposed that the shares in the UK co be transferred to a BVI or Dubai company ("BVI/Dubai co"). BVI/Dubai co will be owned by a nominee shareholder and will have a nominee director, both of which will either be an individual or another legal entity incorporated in BVI or Dubai. The nominee shareholder of BVI/Dubai co will hold shares on trust for another individual (the "Beneficial Owner"). My understanding is that BVI/Dubai co will not be a relevant legal entity for the purposes of the PSC regulations due to the fact that it does not keep a PSC register, is not subject to the FCA disclosure and transparency rules, and does not have voting shares admitted to trading on a regulated market in the UK or EEA. Therefore, the name of the BVI/Dubai co would not need to be disclosed on the PSC register of UK co. However, we would then need to consider the ownership and control of BVI/Dubai co to ascertain whether its members should be entered onto the UK co's PSC register by virtue of them having a majority stake in that legal entity. If the nominee shareholder of BVI/Dubai co is an individual holding greater than 50% of the voting rights, then he/she would be a PSC in relation to UK co. On the other hand, if the nominee shareholder of BVI/Dubai co is another legal entity in the BVI or Dubai then I would need to lo
Is it possible for a shareholder to waive part of a dividend? I cannot see a reason why not, but have not found any affirmative confirmation. Is it possible for them to do this on a permanent basis, so for all dividends during the time the shareholder owns the shares, or does the time period have to be specified?
Is it possible to have a share buyback out of capital carried out in stages? I understand that any share buyback (other than that pursuant to an employee share scheme) can only be carried out when the buyback itself takes place and instalment payments or deferred payments are not permitted. I have a client who wishes to buy shares back over a series of instalments (e.g. 100 shares, 25 shares being bought back every 6 months over a 24 month period.) I wanted to explore if such a situation can be reconciled within the rules of a buyback from capital. If buying from capital, would the detailed capital reduction process (directors statement, gazette notice, etc.) need to be carried out on each proposed buyback date? Or is it possible to carry out the capital reduction process just once to cover each individual buyback which will take place over a 24 month period? The primary reason why my client wants to explore this is to manage cash flow.
My question is whether you need to serve a section 790D notice on a government when you know that that government is a PSC. It is not clear to me that the exemption in regulation 5 of the PSC Regulations extends to the duty to serve a notice under section 790D (2) and (3). There is an exception to the duty to serve notice in section 790(D)(11). Where it's a registrable person, section 790(D)(11)(b) applies. Registrable person means an individual with significant control. "Individual" includes government etc. - section 790(C)(12). While the PSC Regulations contain an exemption from the duty to confirm in relation to section 790(C)(12) "individuals", that seems only to apply in relation to the information being put on the register i.e. section 790M. I am not clear that a similar exemption applies to the duty to serve notice in section 790D(2) and (3).
There's a question and answer on the site about reducing a share premium account without cancelling shares, but it's not clear from the answer whether the company needs to go through the solvency statement procedure as if it did wish to cancel shares in any event. I have a client, which is a private limited company, which simply wants to convert part of its share premium account to be available as distributable reserves on its P&L. Can you please confirm whether this process can simply be achieved through a board resolution and written resolution of shareholders, or does the solvency statement procedure need to be followed?
I have a question regarding the payment of a final dividend: if a company has paid a final dividend to its sole shareholder, can the company then cancel the dividend and receive the funds back subject to the shareholder's agreement?
Our client company wants to buy the shares of a departing shareholder by way of share buyback. Our client, however, wants the agreement for the share buyback to be subject to completion accounts and therefore a retention. Consequently, the purchase consideration for the shares would not strictly be paid in full at completion. Under the provisions of the Companies Act 2006, I understand that a share buyback is void if the consideration is not paid in full at completion (section 691(2)). I have reviewed the guidance notes on PLC and reviewed the relevant case law referenced therein and they appear to suggest that the payment of only part of the purchase price under the share buyback agreement on completion, subject to completion accounts, would make the agreement void. Is this correct?
I am trying to locate a template for articles of association for an unlimited company that specifically includes a provision to allow for a reduction in capital by shareholder resolution. Can you help?
An overseas company is acquired by another company. How this will impact the UK establishment of the acquired overseas company (branch office) registered in the UK? Can the UK establishment file a return with Companies House, notifying of the change? Will foreign acquisition trigger closure?
I have a query relating to persons with significant control. We act for company which has issued both ordinary and preference shares. The ordinary shares comprise less than 25% of the issued shares but they carry voting rights. The preference shares comprise over 75% of the shares in the company but have no voting rights. Is the owner of the preference shares a person of significant control by virtue of owning over 75% of the shares, despite the fact that they have no voting rights and no control in practice? The owner is another company and a relevant legal entity.
In relation to intra-group transactions, we have a query about transactions between sister companies. A is the parent, B and C are owned by A, and D is a wholly-owned subsidiary of B. If B were to sell its investment in D to C, is there any rule prohibiting the resulting gain in B's accounts from being distributable by virtue of it being an intra-group transaction? If not, what considerations are there for B to ensure that this is a realised profit, and therefore distributable?
Where a company proposes to buy back some A and B shares and the B shares are non-voting, should a written resolution be signed only by the A shareholders (to the extent that their shares are not the subject of the buyback)?
In order for a company to utilise its share premium account as distributable reserves, does the share premium, and therefore the shares, have to be fully paid or is an undertaking to pay sufficient? A company client wishes to allot new shares to its parent company. The shares will have a large premium attached to them. The parent does not intend to transfer any funds within the group but will instead provide an undertaking to pay the premium, effectively making the shares fully paid. Without having actually received the share premium, is the company then able to utilise those funds by way of capital reduction as distributable reserves?
A set of articles we are looking at provides that the redeemable shares are to be redeemed for nil consideration. Is such a provision valid? I thought the terms of redemption have to provide for some consideration and redeemable shares can't be redeemed for nil consideration, as the relevant section dealing with the redemption of shares refers to the "payment" for redeemable shares (section 686, CA 2006).
We are looking to make a bonus issue of shares to some of our shareholders. These are currently in issue A Ordinary, B Ordinary and Ordinary Shares. The shareholders to whom we are looking to issue the bonus shares are the holders of the A Ordinary and the B Ordinary Shares. The Articles of Association of the Company state that: "any dividend declared shall require the consent of the Members by ordinary resolution and, unless the shareholders resolution to declare or directors' decisions to pay a dividend, or the terms on which shares are issued specify otherwise, it must be paid by reference to each Members' holding of sharesAny dividend declaredshall be distributed pari passu amongst the holders of the A Ordinary Shares, the B Ordinary Shares and the Ordinary Shares as if they were shares of the same class." Could you please advise whether, on your analysis of the wording above, the bonus issue of shares has to be made to all shareholders?
If an asset is sold at book value from a subsidiary to its member and the subsidiary has positive distributable reserves, the distribution is lawful. But does the transfer create an intercompany balance between the subsidiary and its shareholder which will need to be repaid or waived (thereby creating another distribution)? Or is the asset effectively sold for nil consideration and therefore there will be no intercompany balance between the subsidiary and its member in respect of the book value of the asset?
The liquidation preference provisions in Articles read "On a return of assets on liquidation, capital reduction or otherwise, the assets of the Company available for distribution amongst Shareholders after payment of its liabilities .....". The company will in due course be voluntarily struck off and, prior to that, needs to return cash to shareholders (after payment of all liabilities) and the assumption is that the liquidation preference provisions will be relevant for this purpose. I have a couple of questions. (i) Will a reduction of share premium account, to create reserves and then subsequent distribution, be caught by a "capital reduction" above or is a "capital reduction" in this context only relevant where there is a return of surplus capital directly to shareholders following a reduction (i.e. no reserve created) (ii) if return of capital is only relevant for purpose of liquidation preference I am assuming that capital could then be distributed in accordance with the liquidation pref provisions and it would not be necessary to return capital to only those holders of shares who had paid a premium. I am sure I'm probably over complicating this, however I want to be comfortable that the process followed falls firmly within the liquidation preference, rather than a straight distribution to shareholders where I am assuming shareholders would share in line with their entitlement to dividends.
If a company has made an SR08 application to Companies House to restrict the disclosure of a PSC's information, I understand that a note is put on the PSC register of the company stating that an application has been made. Is that correct? Also, is there standardised wording for the note on the PSC register?
If an English company (A) is wholly owned by an overseas unlisted company (B) (which therefore is not a registrable RLE itself) it is necessary to look up through the group to determine whether anyone has indirect control of A. Paragraph 18 of Schedule 1A to the Companies Act 2006 (CA 2006) provides that a person has a right indirectly if they have a majority stake in a legal entity and that entity has the right in question. If that legal entity is part of a chain of legal entities, a person will exercise the right indirectly if each entity in the chain has a majority stake in the entity immediately below it in the chain, and the last entity in the chain has the right in question. However, B is owned by numerous small corporate shareholders, none of which have a majority stake within the meaning of paragraph 18(3) of Schedule 1A to the CA 2006. Does this mean that the chain is broken and no entity can be an RLE? That would appear to be the case, because even if any of the small corporate shareholders are owned by someone with a majority stake at the next level up in the group, there is no chain whereby each entity has a majority stake in the entity below. Also, would the above scenario be interpreted differently if the numerous small corporate shareholders of company B above are party to a shareholders' agreement, which contains provisions on exercising voting rights on specific agenda items of shareholder meetings in a specific way? A shareholder will have
I am looking at a company with different classes of shares, where each shareholder will have one vote on a show of hands, however, voting rights are weighted in respect of a poll vote only. In this instance, no shareholders would not meet the second specified condition when voting by hand, but certain may do so if a poll vote is conducted. The company's articles provide that at a general meeting decisions shall be taken in the first instance on a show of hands, unless a poll is demanded. The default position is therefore that shareholders will vote on a show of hands. How should rights under specified condition 2 be recorded in terms of the PSC register in such case?
Do you have a view as to which form of solvency statement I should use where the intention is to apply for voluntary striking off following the reduction of capital? This is not a winding up as such but it does seem odd to use the going concern statement where there is no intention to continue to trade.
If two trustees of a discretionary trust are the only shareholders who own more than 25% of the share capital of a company, how should this be reflected in the PSC register? Would they be regarded as PSCs? Would they have to be noted separately, and if so how is this possible since the shareholding would be duplicated on the register? Or is one name sufficient as trustee of the discretionary trust?
A question has previously been asked as to whether a capital contribution reserve may be reduced by means of the solvency statement procedure or court approved procedure, or whether it first needs to be capitalised by means of a bonus issue, and then reduced (as is the case for other non-statutory reserves). The first part of the question has been answered, but the second question on whether the capital contribution reserve could be capitalised and then reduced does not seem to be. Would this be possible?
The question relates to Company Law, and more specifically, shareholder resolutions. If a shareholder resolution (by written resolution) has passed by virtue of it having achieved the requisite majority of shareholders, is there a way to "annul" this resolution by passing a further shareholder resolution so as to effectively say that the first resolution did not exist? I can find no authority for this, but would be keen to hear your opinion.
A company contacted an entity to confirm whether the entity was a registrable person, as defined in section 790C of the Companies Act 2006. The company considers that the entity is a registrable person, on the basis that the entity has the right to exercise significant influence or control over the company (pursuant to a contract between the company and the entity under which the company must comply with any direction given by the entity in connection with its principal purpose, its banking arrangements, or other financial matters). The entity has however replied advising that in its view it does not have the right to exercise significant influence or control over the company and therefore it is not a registrable person. The entity considers it has "excepted role" in terms of the Statutory Guidance on the meaning of significant influence or control. The company disagrees with the entity's conclusion, but appreciates that in the circumstances the judgment is a fine one. Notwithstanding, what, if anything, does the company need to do now? Is the company required to accept the entity's view and enter on its PSC Register The company knows or has reasonable cause to believe that there is no registrable person or registrable relevant legal entity in relation to the company.? Alternatively, should the company enter on its PSC Register "The company has identified a registrable person in relation to the company but all of the required particulars of that person ha
We act for an English public limited company ("PLC") that is not a traded company. It is convening a general meeting. Under Companies Act 2006 (CA 2006), the requisite length of notice is 14 clear days from the date the notice is given. Under section 1147 where the notice is sent in hard copy form to an address in the UK and the company is able to show that it was properly addressed, prepaid and posted, it is deemed received 48 hours after it was posted. PLC has several overseas shareholders. PLC's articles of association do not contain any provisions to the effect that notice does not have to be given to a shareholder that does not have a registered address in the UK. It seems that under section 310, CA 2006 notice must therefore be given to all such shareholders, in addition to those with an address in the UK. In relation to notices given in hard copy form to overseas shareholder without addresses in the UK, at what point after the posting of notices to those shareholders are they deemed to have been given?
If a company has filed a stamped Form SH03 and Form SH06 at Companies House in relation to an off-market purchase of own shares, does the failure to also file the special resolution approving the purchase (which was validly passed at the time) make the buyback void? Or is the failure an offence by the company and every officer in default under section 29 and section 30 of the Companies Act 2006, but is the buyback valid?
We are acting for a limited company which is redeeming preference shares held by a shareholder. The articles provide that on 1 November each year the holder of the preference shares shall be bound, on receipt of 14 days prior written notice, to surrender to the company the certificate for his shares, which are to be redeemed in order that the same may be cancelled. Could you confirm that no stock transfer form is required to be granted by the shareholder in favour of the company (as is the case in a share buyback) and all that the company requires is to take receipt of the principal share certificate and thereafter complete a Form SH06 to notify Companies House of the cancelled shares?
Is there any way to pass a written special resolution of the members where the resolution is circulated to all eligible members but not all of the eligible members respond or vote? For example, is there any way to have it pass where 75% of the members who did respond accepted the resolution? Is there any way to make the members vote?
If bonus shares are allotted pursuant to an EMI share option agreement, is the authority required under section 551 of the Companies Act 2006 (CA 2006) no longer necessary due to the provisions of section 549(2) of the CA 2006?
Your views are requested in relation to a situation where a public company has acquired its own fully paid shares otherwise than for valuable consideration pursuant to section 659(1) of the Companies Act 2006 (CA 2006). Our understanding, confirmed by the 4 Stone Buildings Article "Acquisition of own shares: what rights attach to shares gifted back to the company under Section 659?", is that sections 662(1)( c), 662(2)(a) and 662(3)(b) of the CA 2006 will apply, pursuant to which the company is required to cancel the shares within three years, unless the shares are disposed of. In view of section 662(4), may the shares be cancelled simply by board resolution, provided that the appropriate notices are given to Companies House pursuant to section 663 of the CA 2006?
If a nominee shareholder, holding shares on trust for the beneficial owner, wants to transfer the shares to a different nominee can this be done by a Deed of Retirement and Deed of Appointment? Do you have standard documents for this transfer?
Where a company declares dividend to a Newco, which currently has no assets or liabilities whatsoever, is the cash it receives from this dividend distributable reserve/profit, sufficient to declare dividends out of?
I am looking for clarification on complying with the new requirements for a company to file details relating to Persons with Significant Control with Companies House - the PSC Register. The PLC guidance advises that a company must comply with the new requirements on 6 April 2016 whereas the guidance provided by the Department for Business, Innovation and Skills, published on the gov.uk site states "From 30 June 2016 onwards, companies, SEs and LLPs will have to deliver this information annually to the central public register at Companies House when making a Confirmation Statement." Are you able to clarify whether a company should therefore have created and filed a PSC register on (or as soon as possible after) 6 April 2016 or whether this can be filed with a company's first confirmation statement as that falls due?
In the process of re-registering a private company as a public company, can the company use its share premium account to allot bonus shares to its members to reach the minimum issued share capital of 50,000? If so, can the company apply the share premium in this manner under section 610 Companies Act 2006 where the resulting allotment would create a deficit in the retained reserves (i.e. a negative balance sheet position)?
If a private company limited by shares wanted to declare a final dividend, then assuming there are sufficient distributable reserves, to what extent is cash actually required on the balance sheet when the intention is that the final dividend is a device to create a debt which will then be set off against an amount owing from parent to subsidiary? If there is no need for cash then how should the final dividend be framed, as presumably framing it as a final cash dividend would trigger the need for cash on the balance sheet at the time the declaration is made? We typically have accountancy firms suggest to us that cash is not required hence the question.
I am preparing a Cross Option Agreement under which each shareholder grants to the Company a call option over his shares, and the Company grants to each shareholder a Put Option over such shares, both of which are exercisable upon death (and envisaging pay outs from the life assurance policies taken out over the lives of the shareholders in favour of the Company). As exercise of either option would constitute a buyback of shares I have made exercise of the Put Option conditional upon a) the Company having sufficient distributable reserves at the time to make the buyback b) the Board having obtained a resolution of the Company approving a draft form of contract effecting the proposed Buyback as contemplated by section 694 of the Act and c) the Board having confirmed to the relevant Option Party that the Company is otherwise able to purchase the Option Shares in accordance with any relevant provisions of Part 18 of the Companies Act 2006. My question is would we need to obtain shareholder approval of the buyback contract prior to entering into the Option Agreement (thereby treating the Option Agreement as the buyback contract under Section 694(3) CA 2006) or do we only need to obtain this once the Put Option has been exercised and it is certain that the buyback is to take place and a price has been agreed etc?
1. If all the share capital of an unlimited company is held by a nominee shareholder on behalf of an individual (beneficial owner), and that unlimited company fails, would the nominee or beneficial owner of the shares be liable? 2. If the nominee shareholder is liable, are they indemnified from any of the loss in trust law?
If an SH08 form has been registered twice at Companies House as a result of two forms accidentally being enclosed in an application, is the only option to apply to court under section 1096 of the Companies Act 2006 for rectification of the register?
If the shareholders agreement is made between the company and all the shareholders and makes provision for the buyback is it necessary to (a) execute a further buyback agreement or (b) seek a written resolution?
A plc wishes to redeem preference shares by a reduction in capital. Aware that this needs approval via special resolution. There are 5 shareholders: 4 shareholders hold both ordinary and preference shares and the 5th shareholder only holds 70 out of 1000 ordinary shares. My reading of the legislation (section 717 in relation to voting rights) is that any member holding shares which are subject of the resolution are not eligible to vote i.e 4 of the 5 shareholders? Therefore only one shareholder can vote but as he only holds 70 out of 1000 ordinary shares he cannot meet the minimum 75% to pass the resolution - is this correct?
What type of resolution would be needed to temporarily disapply shareholders pre-emption rights, in respect of a transfer of shares, where that pre-emption right is contained within the company's articles of association? I am acting on the purchase of a small private Ltd Company. The two shareholders are transferring their shares to my clients.
Scenario: company A has articles of association which include 1. a deemed transfer provision which says that a leaver is deemed to serve a transfer notice and is required to transfer his shares to the company at par value/market value (depending on the circumstances of the leaving), and 2. an article which expressly says that where the deemed transfer provision applies, "all shares held by that shareholder shall be offered for sale to the company (but for the avoidance of doubt, the company shall not have any obligation to purchase all or any of such shares). Questions: 1. in the above scenario is the company technically carrying out a buyback of shares? 2. if so, assuming it has distributable reserves, does it need the normal board minutes, a share purchase agreement and a members written resolution to carry out the share buyback? My understanding is that normally for deemed transfer provisions (at par), this would not be seen as a "share buyback".
Does article 54 of Table A impliedly restrict the holding of a virtual general meeting? In other words, does it prevent shareholders (being corporations represented by authorised representatives) from attending a general meeting over the phone?
What date is the provision coming into force that prohibits a corporate entity from being a director? By what date do you need to have filed such an appointment? And for how long can the corporate entity be a director until they have to appoint a natural director?
I am dealing with a company whose articles were adopted in 2006. They have wording whose effect is to require shareholder resolutions to be passed in general meeting. The company now wishes to pass a resolution which is not of a type mentioned in or required by the Companies Act 2006. I understand that, if it were a statutory resolution, section 300 would apply and the company could use the written resolution procedure. But what if the resolution is a non-statutory one, as here? Must the company hold a general meeting? My instinct is no. But section 300 wouldn't apply and we don't want a subsequent challenge to the validity of the resolution.
Reducing share premium account: we have a situation where a client company, for commercial reasons, seeks to reduce the value of its balance sheet and wants to do this via a reduction of capital. Is it possible to reduce the companys share premium account by way of a capital reduction without reducing the share capital of the company, therefore avoiding the need to cancel any shares currently in issue? If it is possible to reduce the companys share premium account without cancelling any shares, can the solvency statement procedure be used to carry out the reduction?
In a situation where: 1. a company is making a distribution in specie of a business to certain shareholders, which distribution is to be satisfied by the transfer of the business to a newco owned by those shareholders at the direction of those shareholders in consideration of those shareholders receiving shares in the newco as part of a demerger process; and 2. the demerger agreement which defines the nature and extent of the business to be so distributed contains provisions for completion accounts and a later reconciliation of client lists; and 3. the dividend in specie is not to be given a cash value or equivalence in circumstances where the company has sufficient reserves to declare the dividend in specie; would it contravene any rules of company law for any equalisation or redress necessary after the drawing of the Completion Accounts and/or the reconciliation of client lists to be carried out as a correction of or clarification of or completion of or adjustment to that dividend in specie?
Is an executive non-departmental public body regarded as a PSC/Relevant Legal Entity? I cannot find any evidence to suggest that a public body would be as it is not required in itself to have a PSC register.
We are doing an own share purchase of shares out of distributable profits. Normally you establish distributable profits by looking at the previous filed accounts. In this case, the company’s filed accounts do not show sufficient distributable profits. However, the company’s management accounts do. Can we use the management accounts as being the basis on which the directors decide to authorise the own share purchase out of distributable profits (as opposed to capital)?
Can a limited company fund a buy back of its shares by way of a loan if that company has sufficient distributable reserves? In this instance does the payment for the shares have to come from the distributable profits or can it be from the bank loan?
Please could you comment on whether the statutory notices to be sent to PSCs, such as the notice by a company to an individual under section 790D(2), may be added to in any way (eg to include language to explain the requirements in layman's terms). My understanding is that your precedents are template versions based on the examples set out in non-statutory guidance and therefore it would be possible to insert additional text.
My client wants to hold the legal title to shares in Company X, but transfer the beneficial title of those shares to his daughter. However, he does not want his daughter to know that he owns those shares (ie. doesn't want her to sign anything). Would such a transfer be possible and if so, how?
What happens if a company does not comply with the statutory obligations in a share buyback out of capital? The company purchased a share from a shareholder a few years ago, a contract was executed and stamp duty for the share consideration paid. But no board meeting, special resolution, solvency statement or notice in Gazette. What are the ramifications for the company/directors? Can the company remedy this now?
Revaluation Reserve - our company has a negative revaluation reserve due to negative revaluations of subsidiary companies. Does the negative revaluation reserve need to be taken into account when determining profits available for distribution or can it be classed as an unrealised loss and not offset against realised profits?
I have been reading your note on transfer of shares. Following completion, the stock transfer forms were sent for stamping and now, a few weeks later, we've received the stock transfer forms, duly stamped. Since the share certificates can't be issued until such time as the register of members has been written up (so the holder is officially a shareholder) should the date on the certificate be the date of completion (and it's just the case that the share certificate can't be issued to the company before the register of members has been written up) or should it be dated the same date as is entered in the register of members (ie. the date when the register of members is able to be updated)?
Does the requirement under section 720B(1)(c) of the Companies Act 2006 to file a form SH19 mean that the buyback is effective upon registration of the shareholders resolution (in relation to a purchase pursuant to an Employees Share Scheme)? If so, what does that mean for the time limit for the surrender of shares and payment under section 723(1A) introduced by the 2015 Buyback Regulations? It does not appear to be clear at what point in time the buyback is effective nor whether a form SH06 is to be filed even though a Form SH19 has been filed.
What is your view on section 293(7) of the Companies Act 2006? We note that there is no provision in the Act for members to circulate a written resolution. However, if a sole director refuses to circulate a written resolution proposed by the members but the members otherwise circulate and pass that resolution, is section 293(7) sufficient to save that resolution notwithstanding the fact that it has been circulated by the members who had no authority to do so?
In regards to a written resolution being circulated, and a shareholder is silent on whether or not they agree with the resolution - can a companies articles include a provision with the effect that if a shareholder is silent on a proposed resolution, their lack of response will constitute that they agree with the resolution being passed?
When a company issues new shares, is there a minimum amount that needs to be paid on those shares at the time of issue or can those shares be issued on the basis that the full subscription price (including par value and any premium) can be subsequently called by the company?
Provided there is nothing to the contrary in the company's articles, is it okay for a company when sending an AGM notice not to send a proxy form with the notice but in the notes to the AGM notice to refer the member to the online proxy form and to say that where a hard copy is needed that they should contact the office for the office to send them a hard copy?
Are standing proxies effective in the UK? Where there is a sole corporate shareholder is it possible to arrange for an individual to have authority to represent such corporate shareholder in all shareholder meetings rather than having to appoint an individual every time a meeting is organised?
With regard to elections after incorporation to keep registers on the public register - the various provisions in the Act refer to the election "by the private company itself". Do you think that means a board decision or an ordinary resolution?
My client's corporate structure comprises of Ordinary A Shares, Ordinary B Shares and 12% Cumulative Redeemable Participating Preference Shares. We are seeking to cancel the preference shares and the holder of those shares to be given half of the issued A Shares. Can we simply cancel the preference shares and transfer the A shares or should there be a special consideration for the preference shares?
We are advising a company about a tax restructuring exercise but the query involves a matter of company law. Ltd Co A has 3 shareholders - the hostile shareholder in question has 10% of the shareholding with just standard dividend and voting rights. As part of the restructuring, a holding company is being formed which will own 100% of Ltd Co A. Therefore, the client needs to get the shareholder to (a) give up his shares voluntarily or (b) give them up for good consideration. A method for valuing the shares has been agreed and set in stone back in December 2015 when another shareholder had her shares bought back for good consideration. If the hostile shareholder refuses to either give back the shares voluntarily or accept the going rate for them, what can the company do to "force" him to give up the shares? There is no shareholder agreement in place and the articles of association are silent other than stating that the company has a lien over all shares.
I act for a private company which recently admitted its shares to CREST. The shares are now registered in the names of various nominee companies (brokerage entities subcontracted to hold shares in CREST subject to certain custodian agreements). Accordingly, ultimate control in respect of the shares vests with the beneficial owners of those shares. The company adopted model articles on incorporation which included the usual provision that, except as required by law, no person is to be recognised as holding shares on trust and the company is not bound by and does not recognise any interest in any share except the absolute right to it in the registered member. The company now wishes to adopt new articles and rely on the exception in section 145 of the Companies Act 2006 in order to include a provision in the articles which enables a registered member to nominate a person to exercise the voting rights attached to shares. Am I correct in thinking that in order to pass the necessary resolution to adopt the new articles (disregarding the requisite percentage required for this purpose), a director on behalf of each nominee company, rather than the actual beneficial owner, will need to sign the resolution for it to be effective? I appreciate that each nominee company could appoint the relevant beneficial owner as its proxy for this purpose, but some of the nominee companies are proving reluctant to engage in the process. Is there any other way in which the benefic
Can a private limited company issue a dividend for an uncertain amount? I have a client that is in the process of winding-up several companies as part of a re-organisation. As there are a few potentially variable receivables (such as interest payments) due to appear before the dividend is paid and the company shut down, they want all receivables included even though the amount is not yet finalised. My thinking is that if the money hasn't been received, it is not yet a realised profit so can't be used to work out distributable profits but would be interested to know your view.
If a shareholder has in place a registered continuing power of attorney do the attorney's details need to be put on the PSC register once he starts exercising his powers (I assume not beforehand)? If so, would that be in addition to the shareholder or in the shareholder's place?
For the purposes of the PSC regulations do ‘rights to appoint or remove members of the board’ mean only express rights contained in, for example a shareholders agreement or articles of association, or does it also include the right a shareholder may have gained by virtue of having a majority shareholding of the Company.
If 75% of shares in a private limited company are owned by the estate of a deceased individual (without any nominated beneficiary or corporate entity at present), how should this be entered onto the company's PSC Register?
Where a company shareholder who meets any of the PSC (person of significant control) conditions 1-3 has delegated their decision-making to a third party via a power of attorney due to dementia/being mentally incapable of handling their own affairs - is that third party likely to be considered a PSC under condition 4 because they are exercising the shareholder's rights under the power of attorney? Or will they be exempt from PSC condition 4 under the same exception given to someone exercising a function under statute, for example a liquidator or receiver?
I should be grateful if clarification as to the order of post-buyback steps, in particular on the relevant dates for the purpose of the register of members and Form SH06. As I understand the process, where stamp duty is payable on the buyback shares, the register of members should not be updated, or the buyback shares cancelled, until after Form SH03 has been stamped by HMRC. Assuming that is correct, then in the below example scenario what date should be put (a) in the register of members as the date of the buyback and cancellation of the buyback shares and (b) on Form SH06 as the "date of cancellation"? - The buyback agreement has a completion date of 1 July - Form SH03 was dated 1 July and was promptly sent to HMRC for stamping - Form SH03 was stamped 28 July - The stamped SH03 was received back today, 4 August - The company secretary is now are ready to update the register of members and file Form SH06 and the stamped Form SH03.
If a company enters into a buyback contract for completion in two phases, it must meet the distributable profits test on completion of both phases. If, however, it does not meet the test at the second, delayed completion date, it cannot complete the buyback. I note that s735(2) means the shareholder whose shares are to be bought back may not sue for damages for the failure to buyback. Further, a court cannot order specific performance if the company had insufficient distributable profits (s735(3)). S735(2) applies without prejudice to any other damages claim the shareholder might have. Would such a claim therefore exclude the purchase price of the shares themselves? I.e. it would only be a claim for losses otherwise arising from the failure to buyback?
I hope you can help with the timing of filing accounts for the purposes of section 838(6) and declaring a dividend. Section 838(6) provides that, where interim accounts are used by a public company to justify a distribution, they must be filed at Companies House. Do they have to be filed before the dividend is declared by the directors? We have a board meeting to approve the interim financial statements in September and would like to declare a dividend at the same meeting - is that possible? Do the accounts have to be filed before it is declared? Or just before it is paid?
My question relates to the use of funds held in a share premium account. I know they cannot be distributed, I know they can be used to write off the share issue expenses and I know how to create distributable reserves through capital reduction. What I am not clear about is whether the share premium funds can generally be used as working capital, to pay other debts and expenses of the company such as start-up costs and expenses? If not, can the pot of money created as a distributable reserve through a reduction of capital be used generally by the company as working capital rather than distributed to shareholders?
I just wondered what the position is where you have an incorrectly completed stock transfer form and what (if anything) should be done to rectify it? The issue is that the name of the transferee company is missing one word (although all other details are correct). The forms have already been stamped by the stamp office. Does the missing detail on the form affect the validity of the form? The details have been correctly written up in the company's books and the name is correct on the share certificate.
1. Can a share certificate be issued in respect of a share transfer if the consideration payable is subject to an adjustment? 2. The stock transfer form has been submitted and stamped on a provisional basis, so can we write up the register and issue a share certificate or do we need to wait until the consideration is finalised (by way of a completion accounts mechanism). 3. What date should be stated on the certificate, the date of transfer or the date of the last stamping?
At a recent meeting of a public company, there was some shareholder dissent. This shareholder later challenged the minutes of this meeting as being an inaccurate record as they do not contain his criticisms. What is the position in relation to recording the words of troublesome shareholders at these meetings?
I am acting for a private limited company in a share buyback. The articles provide that the company can purchase any of its own shares provided that the buyback agreement is approved by a special resolution passed at a general meeting. Does section 300 of the Companies Act 2006 mean that the required resolution can now be done as a written (special) resolution without amending the articles?
My query relates to the notice by a company to an individual under section 790D(2), specifically section 2 (h) (nature of control) of your precedent version. In relation to a shareholding meeting the first condition, please could you advise if we would put the PSC's exact shareholding in section 2(h) of the notice (e.g. that they hold 33% of the shares) or would we put the wording that will potentially be used in the person's entry in the PSC register, (e.g. the person holds, directly or indirectly, more than 25% but not more than 50% of the shares in the company)?
If a company wants to reduce the share capital and signs a solvency statement - if the balance sheet technically states the company is insolvent, is this legal as the company will still be able to meet all the liabilities in the future
I am carrying out a reduction of share capital for a client so as to leave only £1 remaining (one ordinary share). In addition to the nominal value there is a small amount of share premium. My question is, do you have to refer to the reduction of the share premium account specifically in the resolution or does it suffice to simply refer to the reduction and cancellation of all but one of the shares. I see that you have a standard resolution for reduction and a resolution referring to reduction of share premiums and I can't find anything in the legislation as to why that might be required.
When a limited company comes into being at Companies House, what are the standard memorandum and articles that are provided? Further, is it possible for a limited company to come into being without either of these?
On a serious loss of capital, when a general meeting is called pursuant to s656 CA 2006, what should the notice of meeting include? If the shareholders are deciding what, if any, actions to take then we may not know what the proposed resolutions are. Do you have a precedent?
I understand that under the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 section 23, the names of all registered companies/LLPs must be displayed at the registered office. We are a small firm with hundreds of small companies/LLPs registered here. Is it necessary for us to display each of these names for at least fifteen seconds every three minutes? I don't believe at present that our small office has the physical space to do so. Is this requirement as rigid as it appears to be in these regulations?
Our client wishes to reduce its share capital by reducing all of its non-voting preference shares by way of written resolution supported by solvency statement. There are four preference shareholders - three of whom agree to the cancellation (and hold sufficient shares to approve the reduction of share capital) and one who is against. Can the company cancel all of its preference shares against the wishes of the dissenting shareholder (who holds 24% of the preference shares)? We understand that the dissenting shareholder might bring an unfair prejudice action under section 994 Companies Act 2006, but is there anything that prohibits us from carrying out the process regardless?
On amending a special resolution: A client (call it Members Club Ltd) has come to me as in 2014 they held a GM to adopt new Articles. Shortly before the GM (but after the notice and draft articles had been circulated) some members approached the board to make some minor amendments, the most major of which were the addition of a sentence protecting property required for the basic operations of the club and the deletion of a paragraph that was better suited for incorporation within the club rules. Their solicitor at the time (apparently) said it was possible for the amendments to be included in Articles at the forthcoming GM and he then produced the Erratum sheet on the night of the GM and copies of the amended Articles. The special resolution was carried on a show of hands and there was no demand for a poll. There has subsequently (approximately 1 year after the GM) been a challenge to the validity of the new articles. The challenge predominantly focuses on non-compliance with s283(6)(a) of the CA '06 as the Articles adopted were not exactly the same as those circulated with the notice and the amendments appear to be outside the bounds of those permitted in Moorgate Mercantile Holdings. I would appreciate your thoughts as to the applicability of the Moorgate case and any other relevant cases to this issue.
A subsidiary has given a loan to its parent company. The parent company is no longer in a position to repay the loan to the subsidiary. If the loan is impaired in the accounts of the subsidiary, is the amount of the impairment deemed to be a distribution?
I have been asked to advise on amending articles of a charitable company, the amendment being to permit majority decision making outside meetings by means of electronic communication. For the actual article amendment itself, is there necessarily any prescribed words or can we state something along the lines "it is permissible for directors to pass a majority decision outside of a formal meeting using electronic or other means of communication subject to a record being kept of the individual responses to directors and for this to be reported and formally minuted at the next board meeting" Is there anything I should particularly be considering?
We are advising a client who is looking to buy a company. The seller only has title to 95% of the shares and cannot trace the 5% shareholder(s). I understand there is a statutory compulsory purchase procedure that can take effect with 95% of the sellers agreeing. Or alternatively we could alter the articles to include a drag along provision. My question is - what must be done with the proceeds of sale for the 5% shareholder(s)?
If a company incorporated under the 1985 Act adopts new articles with an express power for the board to allot shares pursuant to section 550 then do you need an additional ordinary resolution as well or will the special resolution to adopt the new articles containing that power suffice?
We have been asked to advise on the possibility of a one share company, with a single shareholder, completing a share buyback. The company wants to be able to subdivide the one share into one hundred shares and then grant a 5% option over 5 of the 100 shares. The option needs to be granted by the company and not the shareholder. Is the share buyback (of the 5 shares) possible given the rule that the person being bought back from is ineligible to approve the shareholder resolution to effect the buyback?
I have been asked to advise two shareholders who wish to buy the shares of the third shareholder who will retire in three years' time. They want to structure it as an own share purchase by the Company out of distributable profits. They wish to enter into a put/call option to fix the price and bind the parties now - following advice by their accountant. I have advised that this presents problems. The company will not be able to commit to buying back shares out of distributable profits in three years' time as this is uncertain. Is there any way around this other than a non-binding heads of terms (which seems to me the best option)?
How do you create a new class of shares? A company has 100 ordinary shares at £1.00 each and would like to create a new class of A shares. These shares will have rights to income but no voting rights. What paperwork is required for this? Is the following correct: Board Minutes to issue new shares and resolutions to give directors authority to create a new class of shares and amend the articles of association?
Where a reduction of capital is carried out (using the solvency statement procedure) and the relevant shares are cancelled, is a Form SH06 required in addition to a Form SH19? I note that the top of SH06 refers to it being for cancellation of shares by a limited company 'on purchase'.
I have a question on what is meant by "absolute veto rights" for the purposes of condition (iv). If a company is owned 90/10, and the shareholders' agreement provides that decisions of the type in para 2.7 of the statutory guidance have to be made unanimously, does the 10% shareholder have an absolute veto right? Let's assume the protection of minority interests point isn't relevant. I'm just trying to understand conceptually whether a requirement for unanimity equates to an absolute veto right for the minority shareholder.
Is it possible to return share premium by way of a capital reduction direct to one shareholder (rather than credit to a reserve) where that shareholder holds shares which were not issued at a premium (provided all other shareholders of the company agree)?
Where one Executor has signed a Stock Transfer form without consulting the other named Executors (there are three Executors named on the Grant of Probate), is this action binding? And if it is, and the shares have been transferred to a third party (and that third party has relied on the transfer), can the individual Executor be sued or was the Company in breach of their duties for not checking who the named Executors were on the Grant of Probate before actioning the transfer? We have read your ASK questions titled Share transfers: is it possible to register a transfer of shares by the personal representatives of a deceased shareholder without the production of a grant of probate? and Transfer of shares: what is the process for transferring shares in a company on the death of a shareholder?
I have client company with 8200 1p shares (4 shareholders). They are currently contemplating a share reorganisation. The stage one plan the company to buy back 950 of one of the shareholders shares so that there are then 7250 issued 1p shares. Stage 2 will see the issue of a further 2750 new 1p shares to new investors. Regarding stage one, can the buy back be for nil value (with all the shareholders' consent?)
Who has the responsibility of preparing (if a company has failed to do so) or maintaining the PSC register once a company has appointed a liquidator? Would a PSC (by virtue of them meeting specified conditions 1 and 2) remain on the PSC register once the company has appointed a liquidator?
The company in question is a private company limited by shares. Is the only way for a company to take existing shares from a leaving shareholder and place them in treasury by way of an off-market buy-back or can the departing shareholder sign a stock transfer form in favour of the Company?
In relation to financing a buyback of shares through a new issue of shares. We know that pursuant to s692(2)(a)(ii), a private limited company may purchase its own shares out of the proceeds of a fresh issue of shares made for the purpose of financing the purchase. Further, we know that the new issue must be for cash, in addition to being for the purpose of funding the share buyback, otherwise financing the buyback through the new issue would not work. However, we cannot locate anywhere that states that the new issue must be for cash, please would you be able to confirm that this is correct and if so, where this is stated.
I have a company whose balance sheet only consists of unpaid share capital (as a debtor balance in assets). E.g. a debtor balance of 1,000 (unpaid share capital), and share capital of 1,000. Section 641(4)(a), CA 2006 states that a company may extinguish or reduce the liability on any of its shares in respect of share capital not paid up. Presumably, it would be permissible to simply cancel the unpaid share capital (leaving one share) using the solvency statement procedure? Also, would there be any requirement to create a reserve in this scenario?
Would a member be treated as providing consent to a written resolution in electronic form for the purposes of section 296 of the Companies Act 2006 if he or she were to respond by way of a tool such as survey monkey if a link were to be sent to the member by the company by email?
A few years ago a company purchased a number of shares from a shareholder (who is still a minority shareholder), however the filings at companies house were completed incorrectly and no resolution from the shareholders occurred. To resolve this issue, we propose to ratify the buyback by resolution and file the correct forms, is this sufficient? Also another question is whether the shareholder whose shares were purchased can vote on the ratification? I appreciate they would not have been able to vote on the original buyback.
We have a client (an individual) who has noted that a company (whom he does not know or has any connection with) incorporated in 2007 whose registered address which appears at companies house is that of a property owned solely by our client, and as such, not that of the company using it as it's registered address. The companies abbreviated accounts refer to the property. How can we rectify this with Companies House to deal with the change?
Can a private company use its AGM to approve an off market purchase of own shares by way of a resolution authorising the company to purchase up to X shares at a price of £X per share (the relevant numbers would be inserted into the resolution) on the terms of a contract or contracts attached (which would leave the names and share numbers to be completed later) and thereby, effectively, giving the company a general authority to purchase up to a given number of shares for a set price. Or, do the names and precise numbers of shares to be purchased from each respective shareholder need to be included within the contract to be approved?
Is there a prescribed form of register to be used under The Register of People with Significant Control Regulations 2016, or will the form of the register vary according to the nature of the company or LLP in question?
A company is buying shares back from one of its shareholders. To raise the finance to do this the company is procuring a loan from the bank. What is the process to buy the shares back? Will it be a buyback out of capital?
We're acting for a client who has issued partly paid shares to shareholders (£1 shares issued at £0.01). The company would like to carry out a capital reduction to extinguish a liability on shares (i.e. to waive the right to pay the unpaid amount of the shares). If it does this, would the end nominal share capital for the purpose of the SH19 be paid up shares of £1 or paid up shares of £0.01?
We are acting for a company which has issued partly paid shares. The company (with the consent of the shareholder who holds the partly paid shares) would like to get rid of the partly paid shares. How is this possible?
My client was the owner of a leasehold property and owned a share in the management company along with the other leaseholders who also each own a share in the management company. She sold her property on 1 April. On 20 March (so prior to the sale) she was informed that the management company were anticipating paying an interim dividend in the sum of a few thousand pounds on or around 6 April and then a final dividend at year end 31 August - again for a few thousand pounds. We have today heard from the management company that the interim dividend has not yet been declared. My question is this: If a dividend is declared, would my client be entitled to the dividend or will any dividend now be payable to the new leaseholder who now owns a share in the management company. The share was transferred upon sale of the leasehold property on 1 April. My client feels that she should be entitled to the payment because the dividend would relate to the time she was in ownership of the property.
I am aware of the requirements of section 694 and 695 of the Companies Act, requiring a buy back contract (or a memorandum of its key terms) to be approved by an ordinary resolution of the shareholders. I have a client who would like to amend its articles to permit the Company to enter into buy back contracts in an agreed form, with a price to be determined by the directors without needing separate shareholder approval to each contract. The names of the shareholders would not be known at the time that the articles were amended. I believe that the provisions of the companies act would prevent this. Do you agree? If the aforementioned is not possible and they need to obtain shareholder approval of buy back/memorandum of key terms on each separate occasion, would they need to disclose the price? I would consider price to be a fundamental term of the contract and that this would need to be included in the contract itself or the memorandum if circulated with a written resolution but that if the contract were to be approved at a meeting they would simply have to have the contract available for inspection prior to the meeting and would not need to refer to the price per share in the resolution itself, therefore the only shareholders (other than those who are a party to the contract) who would be aware of the price would be those who attended the registered office or the meeting to inspect the contract. Do you agree?
Where some only of a shareholder's shares are being brought back by the Company can a written resolution be used and signed by the shareholder selling shares back if it is made clear he is voting in respect of the shares he is retaining and not those that are being brought back?
If a Shareholder is leaving the business do the shares need to be valued at fair value or can they be bought back at nominal value if this was agreed in writing? Would there be any tax implications for the company or the individual shareholder?
Re the Register of Persons with Significant Control. As I understand the matter, an English company is required to maintain a PSC register unless it is listed on the LSE or the AIM or the ISDX markets. I am thinking here of an unlisted English subsidiary which is 100% owned by a Canadian parent. The shares of the parent are listed on the Toronto and New York stock exchanges. Am I correct in saying that the fact that the parent is listed on these exchanges does not exempt it from being a registrable relevant legal entity and it should thus be entered on the PSC register of the wholly owned English subsidiary?
Where shareholders have passed a resolution declaring a dividend but have not specified the date when it is payable (neither on the day in question or a future date) - what is the default position for the dividend becoming due any payable?
In a company purchase of own shares where there are 2 shareholders holding 50% each can the written resolution procedure be used? As the shareholder subject to the buyback cannot sign the written resolution is it the case that the remaining shareholder is the only 'eligible member' or does the Companies Act section 282(2) mean that all shareholders are eligible members?
Is there a definitive rule on whether the release of a debt owed by one wholly owned subsidiary to another wholly owned subsidiary of the same holding company is a distribution? If not, is there any case law on the subject which I can examine?
Can I check whether a UK Limited company buying shares back from a Senior Executive (upon them being made redundant) would fall within the provisions of section 18 of the Companies Act? Senior Executive holds 5% of the shares and would like the company to buy them back. Price agreed in buy back agreement and payment made in instalments. The preference is for a simply friendly agreement with delayed payment (to assist cashflow). Is this possible or would the section 18 provisions apply?
Subject to the exemptions contained in the Small Business, Enterprise and Employment Act ("the Act") and any associated regulations, does the requirement to maintain a PSC register apply to all companies, regardless of how they are incorporated, for example companies incorporated by statute, prescription or Royal Charter? We are trying to work out whether our client will be under an obligation to maintain a PSC register or constitute a relevant legal entity in relation to its subsidiaries for the purpose of the Act.
I am trying to prepare PSC registers for various companies which are wholly owned subsidiaries of companies in various EU countries. The UK Regulations require the PSC register to include particulars of the central register in the relevant jurisdiction of the RLE from where details of ownership can be obtained. So far, it seems many other EU member states have not put a central register in place. If a PSC is a RLE in an EU member state where a central register of company beneficial ownership information has not yet been devised, what information should one provide in the UK company's PSC register? Is there a list in existence which provides the relevant details of the central registries that do exist in other member states?
We are acting for a private limited company with articles which adopt in part Table A 1948 and which wishes to purchase its own shares using distributable profits. I cannot see any reference in Table A 1948 regarding the purchase of own shares either authorising or prohibiting it. I presume therefore that the company can purchase its own shares and that only an ordinary resolution is required, although when I started using your drafting tool for the written resolution it produced a special resolution?
On the basis alphabet shares with different rights to dividends can be separate classes of shares, if the articles haven't been amended to declare different rates of dividends, can different rates be paid or would the same be unlawful? I am acting on a company purchase where only form SH08 has been filed. There has been no resolution to amend the articles.
We are acting for a company which is to buy shares from one of its directors by using distributable profits. Must the purchase of own shares be paid in cash at completion or rather than the director actually receiving funds from the company, can the company simply credit his directors loan account by the amount of the consideration from the shares at the point of completion?
We are advising a client on a share buyback. As part of the buyback, the selling shareholder wants the remaining shareholders to enter into an anti-embarrassment agreement to stop them from selling on their shares for an elevated profit, and if they do, to ensure that the selling shareholder gets their fair share of it. The anti-embarrassment agreement will be between the selling shareholder and the remaining shareholders (the company will not be a party to it). They are requesting that the company guarantee the anti-embarrassment agreement (either in the anti-embarrassment agreement itself, or by separate agreement). Our question is this: If the company guarantees the shareholder’s obligations under the anti-embarrassment agreement (either in the anti-embarrassment agreement or separately), does it risk invalidating the buyback under s691 CA 2006? The reason we think it may is that there is a chance, albeit slim, that the company may have to pay a later amount for the shares being bought back and therefore any amount subsequently paid could amount to ‘deferred consideration’.
If a private company reduces its share premium account using the solvency statement procedure, can the amount of the reduction simply be repaid to the shareholders as a capital distribution (in cash) or does it have to be paid as a dividend. There are sufficient distributable reserves.
What should be included in a company's PSC register if they are wholly owned by a registered charity which is governed by Royal Charter? This charitable organisation does not appear to be one of the few entities which are treated as individuals for the purposes of the PSC register (e.g. local/national government and international organisations etc) and would also not be an RLE either, so presumably you look through it to see who controls it - and if anyone is a PSC then they would be included in that company's PSC register. Would you agree?
I am looking for guidance on determining whether an individual is a registrable person of significant control where a UK company has a number of different share classes. Is it the intention that the voting shares are added together and the percentage of the total considered to determine whether the 25% has been reached, even though the voting rights may differ or overlap between the classes? Or is it possible to have PSC's in relation to individual share classes in which case there could be any number of PSCs in relation to the company. Any guidance would be appreciated.
Will the new PSC register regime apply to companies that are registered in the UK as overseas companies? The entity concerned has an overseas registered office and a company number that starts FC; it operates and is managed in the UK but it is based in the Channel Islands. If the new UK regulations do not apply, will it be caught under the 4th Money Laundering Directive in due course?
PSC Register: if you are part of a Group of companies where the 100% shareholder of the shares in all the Group lead to a public limited company registered in an EEA state, will the register simply show the Group chain up to the public limited company and stop as the public limited company is not itself required to have a PSC register?
Does the requirement to hold a PSC register extend to public limited companies which are not DTR5 issuers or companies of any description specified by the Secretary of State by regulations. My understanding is that public limited companies where neither of the points above apply must provide a PSC register but a steer would be appreciated.
My question relates to a transfer of shares in a private limited company. I am amending the articles of association of the company to outline certain restrictions on transfer (e.g. no transfer unless the consent of the majority shareholder is obtained). Would an article stating that any transfer of shares would be void, if made contrary to the provisions of the articles, have any affect? From what I can see, any transfer in breach of the articles would be a breach of contract by the shareholder and the remedies would follow from that (damages etc). I'm not sure that the transfer itself would actually be void? And if that is true, would there be any point in having an article stating that the transfer would be void?
If a shareholder dies and the articles contain pre-emption rights to the other shareholders, can the shares be transferred to the beneficiary in the will or do the other shareholders have the right to buy them first? The articles are silent upon what is to happen upon death.
Original date of publication 31 May 2012, republished 5 February 2016. What is the position where a company has issued shares in excess of its authorised share capital? Is that share allotment invalid or is it capable of being ratified? Does it make a difference when the allotment took place (ie if it is pre-October 2009 then it will effectively be a breach of a provision in the memorandum but if it is after that then it will be a breach of the articles)?
An overseas company has registered a branch in England. They now want to move this branch to Edinburgh. Will they need to close the English branch (Form OS DS01) and register anew in Scotland or can they merely update the current register with the new address?
A company (Scottish) has 3 classes of shares, 2 of which have dividend rights, as set out in Articles. The Articles are amended in 2008. The new Articles refer to the 3 classes of shares but they are silent as to any rights. Have the rights to dividends been removed by the new Articles coming into effect or do they still attach to the shares?
I have a query with regard to the PSC register relating to the scenario where an individual holds an interest in a company indirectly via a chain of legal entities. Para 7.4 5 of the recently published draft government guidance states that a person is not required to be entered on the company’s register unless the legal entity they hold their interest through is not an RLE. To my mind this is not definitive but does suggest that if there is any legal entity within the ownership chain which is not an RLE, then each company below that entity will be required to enter particulars of the individual PSC at the top of its chain on its register (in addition to recording details of any registrable RLE immediately above it for example). I have also now come across commentary to this effect. I had previously thought that if there was an RLE within the chain, then companies below the RLE would be required only to record details of that RLE and not look further up the chain to record details of the individual PSC at the top. The logic of this would be that it would be possible to inspect the register of the RLE and find details of the individual PSC that way. Do you have a view as to which interpretation is correct?
I am advising a client in relation to a proposed purchase of shares by a company out of distributable profits. In addition to the buyback agreement to be entered into by the company, the continuing shareholders will enter into an anti-embarrassment agreement which will be triggered if the company is sold on within three years. (The company will not be party to this agreement). The amount payable under the anti embarrassment agreement is subject to a maximum cap. Will stamp duty be payable on the maximum cap, even though it is not payable by the company? What figure should we insert in the form SH03?
I should be grateful for assistance with two queries: 1. are the accounts to be presented to the members limited to the contents of the statutory accounts (a member has requested sight of the detailed income and expenditure account - as the auditors have indicated that this does not form part of the statutory accounts I propose to advise that the members have no right to receive it) 2. A private company still holds AGMs. Its articles require the company to supply the members with a copy of the accounts at the meeting. If the company has only supplied abbreviated accounts will this invalidate the meeting?
I understand that Potel v CIR is authority for the position that an interim dividend becomes a debt payable to shareholders when it is paid, rather than when the board resolves to pay it. I further understand that a cheque constitutes a promise to pay on common law principles (Marreco v Richardson  2KB584). Therefore is it the case that if a cheque is drawn in favour of a shareholder who turns out to be untraceable, and the dividend remains unclaimed, one must follow the provisions set out in the articles for unclaimed dividends (in our case they remain a debt for 12 years) and the directors cannot resolve to cancel the dividend on the basis that it is an interim dividend that has not been "paid" and is therefore not due. Would it be possible to include a provision in a company's articles that says that the directors may, after a certain period of time, resolve that the dividend is rescinded in addition to the provision that after 12 years the debt ceases to be payable?
Could the assignation for nil consideration by a subsidiary company to its holding company of the subsidiary's interest as tenant in a lease of property constitute a distribution for the purposes of Part 23 of CA 2006? The lease could arguably be, in my view, a non cash asset of the Subsidiary although there are liabilities and obligations upon the Subsidiary per the lease. I just wondered if this would be caught by the rules in Part 23.
Advising in relation to the acquisition of a private limited company incorporated under the 1948 to 1967 Companies Acts in which numerous dividends have been declared. The company has two shareholders. Some, but not all, of the dividends have been waived by the minority shareholder. The waivers are in respect of both final and interim dividends. Some of the waivers (relating to both final and interim dividends) are dated after the dividends have been declared and, we assume, paid. If waivers are not effective after declaration/payment does that create an outstanding liability to pay (which may in turn impact on later profits available for distribution)? The affected shareholder is not expecting to receive those dividends. If the waiver has to be given prior to declaration/payment, how can the dividends be waived now? If they cannot be waived, is the alternative to purchase the shares with the right to receive the dividends that have been declared but not paid?
Can a company resolve to give a director (who is also a majority shareholder) autonomy to pay dividends (subject to the statutory requirements that there are distributable profits etc.) in his/her sole discretion without further reference to the other directors/ shareholders specifically so that that director does not have to disclose the amounts of dividend which will be unequal (the company has alphabet shares and the Articles permit the same)?
Following the sale of shares but before the buyer has been entered on the register of members (as the transfer is subject to stamping), can a dividend/distribution in specie be declared and transfer of a property in satisfaction of dividend/distribution be made directly to the buyer (i.e. the beneficial, but not legal owner of the shares)? The buyer has a standard power of attorney to sign shareholder resolutions etc.
An unlisted public company (incorporated under 1985 Act) wishes to buy back shares (out of distributable reserves after general meeting held). Once the shares are validly purchased by the company are they automatically cancelled or as it's a plc does there need to be court approval? The articles are silent on buy backs altogether and only refer to Table A 1985 applying. I understand we can add a provision to articles to allow the shares to be held in treasury but am wondering the cancellation point.
How can a company which currently has ordinary shares of £1 (which shares have been issued fully paid) change it's share structure so that each of the £1 shares becomes a 1p share with a share premium of 99p?
I just wanted to clarify the interaction of s117 (company has 5 working days to comply with request for inspection) and The Companies (Company Records) Regulations 2008 which requires the person inspecting to give 10 days' notice. Section 116 doesn't mention the 2008 Regulations so it's not clear to me whether the request should also refer to the 10 day notice period as well. Should it? Then, assuming no issue over proper purpose, what must the company do within the 5 day period? Is it to allow inspection or to confirm to the requester that he may inspect when the 10 days have elapsed?
My Client company has a number of shareholders who have shares which are only partly-paid up. The company now intends to issue a lien enforcement notice (the relevant provision replicates that set out in the MA for private companies limited by shares). The provision states that the shares subject to the lien may be sold on such terms as the directors resolve, should the existing holder of the shares not respond to a lien enforcement notice. The articles also contain a set of pre-emption rights applicable to all "permitted transfers" (lower case, not defined) but presumably mean any shares which are not prohibited under the articles (which are expressly set out). The question is, will a sale pursuant to the lien be caught by the pre-emption rights or does the fact that the lien article states that the sale is on "such terms as the directors may resolve" take precedence over the pre-emption rights?
I am currently dealing with an issue whereby rectification action is necessary due an unlawful dividend in breach of the articles of the company due to share rights. In the circumstances the shareholders are also the directors. Do you have any precedent deeds of release releasing (1) the shareholders who received the dividend from any liability to repay or (2) the directors from any right the company may have to pursue the directors in respect of that decision. As far as I am aware this would not need to be in the same document.
I have recently relied upon the new rules at Section 692 (1ZA) to permit a de minimis buy-back of the company's shares out of capital. I cannot see that this de minimis exemption would be available to allow a redemption of redeemable shares out of capital (when to me it would appear logical that it should). Can you say if I can rely on the de minimis exemption to permit a redemption of redeemable shares out of capital please?
Is it possible to declare a bonus issue of shares based on a non-round number of shares in issue? For example, for every share in issue each shareholder receives 3.723 shares. A shareholder holding 100 shares would receive 372 shares (with the fractional 0.3% of a share being disregarded as the directors think fit, in accordance with the articles of association).
We are acting for a company which has recently reduced its share capital by solvency statement. As part of the reduction, the company has sub-divided its share capital e.g. the shareholder resolution approving the reduction states that the capital be reduced from £600,000 comprising 60,000,000 ordinary shares of £0.01 each to £60,000 comprising 60,000,000 ordinary shares of £0.001 each. There is no separate resolution authorising a sub-division of share capital and the company has filed form SH19 confirming the post-reduction share capital position with Companies House. It has not filed a separate form SH02. Do you think the wording of section 641(3) CA 2006 is wider enough to permit a company to reduce its share capital by including a sub-division of its shares, and if so, where a company sub-divides its shares as part of reduction, does it need to pass a separate resolution authorising the reduction under 618 CA 2006? Or is it sufficient to just pass the resolution in relation to the reduction, which covers the sub-division? I would also be grateful for your view on whether a separate form SH02 is required to be delivered to Companies House.
We are currently negotiating the terms of a share buyback for a company which currently has three shareholders, one of which is to exit completely. The seller has asked the other two shareholders to enter into an anti-embarrassment deed whereby, if the company is sold in the next few years, they would pay a proportion of the uplift in the same percentage as the shares which the seller sold (i.e. seller currently holds 30%, which is being bought back; other two shareholders agree to pay 30% of any uplift on future exit). The seller has also requested that the company itself be party to the anti-embarrassment deed, as guarantor for the obligations of the two shareholders to pay any uplift in the value. Our view is that if the company could be required to pay any amount in respect of a future sale of the remaining shares, this could be seen as additional consideration for the share subject to the buyback and, as such, the inclusion of the company as a guarantor would render the buyback itself void. Any opinion you could offer on this would be much appreciated.
My client wishes to change the value of the ordinary shares in his private limited company - how can this be achieved? The company has one shareholder who owns 2 ordinary shares at £2 each. He wishes to change the share structure for reasons of simplicity to one ordinary share at £1 to be owned by himself. What are the steps to achieve this aim?
Do you agree that it's possible to buyback nominal value £20k of shares for consideration of £2 by way of a de minimis buyback out of capital under s.692(1ZA) of the Companies Act 2006? In the case at hand the £2 purchase price for the shares is below the annual limit (i.e. the lower of: (i) £15,000 and (ii) an amount equal to the nominal value of 5 per cent of the company’s fully paid share capital as at the beginning of the relevant financial year). On the face of it, the wording of section 692(1ZA) appears to be clear that the annual limit applies to the "purchase price" for the shares and the BIS guidance confirms that shares may be purchased for less than nominal value. However, a concern has been raised that the shares to be purchased in this case represent a significant proportion of the company's total issued share capital (i.e. more than 5% of the company's total issued share capital by nominal value) and whether the second limb of the annual limit could be interpreted as a limit on the maximum number of shares that can be bought back in each financial year (i.e. rather than the maximum purchase price that a company can pay to buyback shares using the de minimis provisions in each financial year). We do not believe that this is the case based on the drafting of s.692(1ZA) but some of the commentary we have seen is confusing referring to purchases of "small quantities" of shares - here we have a large quantity of shares being purchased for a small amo
1) when buying back shares into treasury from 10 different shareholders (one which has a consideration of less than £1000) do we need to draft 10 forms SH03 or do we draft 2 forms, one for the exception and one for the other 9? 2) Are STF's required, and if so, do they get sent to HMRC together with the SH03?
A client company proposes to transfer a property to its parent at market value left outstanding on loan account. The transferor then however proposes immediately to write off the loan. Immediately prior to the write off the subsidiary has net liabilities and negative reserves. Am I correct in thinking that this is an unlawful dividend which (notwithstanding any shareholder ratification) would be vulnerable to challenge by any creditors of the subsidiary and also render the subsidiary directors personally liable to repay the amount?
We are proposing to carry out a share buyback where the company in question has two classes of shares - ordinary (voting) shares and preferred (non-voting) shares, all of which are held by the same person. It is proposed that only the non-voting preferred shares be bought back. Can the sole shareholder vote on a written resolution to approve the purchase contract, given that only the ordinary shares carry voting rights, and none of the ordinary shares are being bought back? Or would a general meeting be needed to approve the purchase?
Can a beneficial owner be named on a share certificate (as opposed to the person named in the register of members)? And what is the legal basis for this? In context: Can an English Limited Partnership (who has no legal entity) be the beneficial holder of shares (their name is on the share certificate) while there is a different legal owner named on the register of members (the partner of the limited partnership)? Thank you in advance for your assistance.
Do the administrative provisions under schedule one of your master Will give the executors and trustees the necessary powers to continue running the deceased's company until it is decided whether any of the beneficiaries wish to continue running the business themselves?
Example scenario: A private company has 100 ordinary shares in issue. Shareholder A and Shareholder B hold 50 shares each. The company would like to cancel a total of 50 ordinary shares (25 held by Shareholder A and 25 held by Shareholder B) and make a payment to the shareholders in respect of such cancellation. Questions: 1. If a company wishes to cancel some of its shares and make a payment to its shareholders in respect of them, is it possible to achieve this by either: (a) a reduction of capital using the solvency statement procedure; or (b) an off-market share buyback out of capital (assuming it has insufficient distributable profits) following which the company cancels the shares? 2. If either option is possible, when should/could the company use one option instead of the other? 3. Does the position change if the 50 ordinary shares that the company wanted to cancel were all held by Shareholder A? (Assuming the capital reduction / buyback has the unanimous consent of the shareholders.) 4. If the reduction of capital route is followed, is it correct that: (a) no share buyback agreement, auditor’s report or Gazette notice are needed, as required under the share buyback out of capital procedure; and (b) the relevant Companies House form is SH19 (not SH03 and SH06 as required under the share buyback procedure)?
Our client is a party to a shareholders' agreement which has a clause which states 'Where so requested by the Directors, any Shareholder who is not a director must vote their shares in any company meeting as direct by the Directors'. Would this clause be valid and enforceable as it appears to restrict the shareholder's voting rights and powers?
If a shareholder wants to pay a dividend to a third party, you suggest this can simply be done by way of a dividend mandate or instruction letter to the Company. Where is the authority for this? Does the instruction need to be approved or accepted by the board?
I am working with a company limited by guarantee, which is also a registered charity. Its constitution provides that 1/3 of directors/trustees must resign at each AGM and may stand for re-election. When a director/trustee resigns and then gets re-elected, am I required to notify Companies House and the Charity Commission of the changes i.e. submit a resignation and then an appointment on the same day? Companies House displays filing history so it is possible to see when directors retire/are appointed but the Charity Commission does not show this information publically.
I understand that final dividends are debts payable when they are declared. We are not able to declare a final dividend for 2015 as the year end is 31 December, but wish to declare a dividend but have it appear in the 2015 accounts as a debt payable. Is it possible for the directors to recommend an interim dividend, and for the shareholders to declare this payable immediately? Would this make the interim dividend a debt payable? Alternatively, is there any other steps that can be taken to make an interim dividend a debt payable?
When passing a special resolution to adopt a new set of articles must the new articles be attached to the resolution or is it sufficient if the resolution points the member to where he/she can easily access a copy? s.283(6)(a) Companies Act 2006 says that the notice of the meeting must include the text of the special resolution. Would you need to attach the articles to comply with this requirement? Or is it acceptable to point members to a website where the articles are clearly signposted? We note that PLC’s special resolution amending articles allow premium listed companies to provide a copy of the new articles for inspection at a given address. If this principle can be extended to unlisted private companies we think that it would be easier for members to look up the new articles on a website rather than travel to an office.
Could a Society under the Co-operative and Community Benefit Societies Act 2014 refer to section 172(1) of the Companies Act 2006 within their board minutes and would this be sufficient in discharging their duties when giving security to a bank for a facility agreement? I cannot find anything similar to s172(1) within the Community Benefit Societies Act 2014.
Where an Association is moving to become incorporated is it possible to transfer the membership through silent acceptance? I.e. where you have thousands of members of the association is there a way for them to become members of the NewCo without each individual member having to apply?
Do you know of any case law or commentary as to the meaning of "necessary or expedient" in relation to s. 1004 (1)(d)(ii) Companies Act 2006? In particular, in connection with the voluntary striking off of a wholly-owned subsidiary that has already hived-up its business and assets to a third party that has agreed to assume the company's liabilities, do you know of anything that might suggest that a reduction of capital under s. 641(1)(a) with or without a following interim dividend in specie of the company's only asset (ie an intra-group debt) should preclude the company from being able to proceed with a voluntary striking off application within 3 months of either of those events? If the answer is no, would you agree that the carrying out of either of those events after an application has been made should not cause the company to have to withdraw its application pursuant to s. 1009?
Can a company director sign but not date a solvency statement in connection with a reduction of capital, and leave it undated with me until the date (a few days later) when the other directors are able to sign it too? If the first director could be contacted by another director just before dating and assured that the financial position of the company had not changed since he had signed the statement, this would seem to mitigate any risk that he was signing a statement which was no longer true at the time it was dated. I have not seen this done before, although I am sure the situation must have arisen where a director is absent or on holiday, but unlike completion documents the statement cannot be dealt with by way of power of attorney.
Original question and answer published 3 October 2013 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?
Our client has asked that a borrower convert its bearer shares to registered shares for the purpose of taking security over those shares (and given they must do so shortly in any case). The borrowers share certificates have been lost and we have asked to rely on a lost certificate indemnity. My question is (1) can an indemnity be validly provided for bearer shares given that ownership depends on possession of the share certificate? and (2) can the shares be validly converted to registered shares on the basis of an indemnity?
It has agreed in principle for a company with one class of shares that a company will pay an interim dividend to shareholder A but shareholder B and shareholder C will both waive their rights to receive such dividend. When the Company considers the amount of interim dividend to be paid, does it need to: (i) Declare that a dividend shall be paid of a grossed up amount (i.e. the total of the amount to be paid to Shareholder A, as well as the amount that is to be waived by shareholder B and C); or (ii) Can the Company declare that the amount of the dividend shall be the total that A in fact receives, with B and C waiving their right to receive a dividend and the Company therefore directing that the dividend that B and C would have been entitled to is instead paid to A? I note that the right to receive an interim dividend arises when it is actually paid and therefore the waiver will need to be given by the shareholders prior to the dividend being paid.
The directors of an intermediate holding company in a group wish to pay an interim dividend to the company's parent, but leave the amount outstanding on intercompany loan account. If the directors simply resolve to pay as an interim dividend, a debt would not be created and would not be enforceable and the parent company would, presumably, be unable to recognise the receivable in its accounts. Can the directors of an intermediate holding company resolve to pay the interim dividend, but enter into an intra-group loan agreement in order to document the dividend as a debt payable, or would this constitute a distribution in kind (and therefore, under the terms of the company's articles, require approval by shareholder resolution)? Thank you.
Are there any restrictions on the length of the option period, such as the perpetuity rules or tax issues? For example, for EMI options there are tax issues if the option is not exercised within 10 years.
There are 34 long leases in a building. When the developer sold the freehold, 18 flat owners set up a company to purchase the freehold. Each of those flat owners has one share in the company. No other shares have been issued. A number of other flat owners now want to buy in and a price has been agreed. (Ideally they want to reach the point where all flat owners are also shareholders in the freehold company). Presumably the company has to issue more shares and then sell them but how is the money then paid out to the current shareholders (by that time the new shareholders will also have an entitlement). Should the shares be issued to the existing 18 shareholders to then sell to the new shareholders? What would the tax position be in either case?
Original date of publication: 16 August 2012. Republished on 27 July 2015. 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
Original date of publication 27 February 2013, republished 22 July 2015. I have been advised by a notary that a general board resolution will not suffice in authorising a company secretary to sign powers of attorney on behalf of a compnay and in effect the company must grant a general power of attorney to the company secretary and then ratify it by a board resolution to allow the company secretary to sign POAs on behalf of the company. I am unable to locate any precedent docuemnts (board resolution or POA) on the PLC webite to effect this, therefore, would you be able to assist?
Original date of publication 22 May 2013, republished 22 July 2015. 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?
Original date of publication 7 December 2012, republished 22 July 2015. If directors refuse the register a transfer to the executors of a deceased shareholder can we get a court order compelling them to transfer
Original date of publication 13 June 2012, republished 22 July 2015. I am having to increase the share capital of a private company prior to selling shares to a corporate buyer. Can you point me to the a resolution precedent to increase the share capital, please?
Original date of publication 14 August 2013, republished 22 July 2015. 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?
Original date of publication 17 October 2012, republished 21 July 2015. Do "clear days" include or exclude weekends and public holidays? I have looked at section 360 of the Companies Act 2006 which defines "cler days" and it simply mentions that the period of notice excludes the day of the meeting and the day of the notice.
Original date of publication 30 September 2013, republished 21 July 2015. 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.
Original date of publication 18 September 2013, republished 21 July 2015. 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?
Original date of publication 6 September 2013, republished 21 July 2015. 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?
Original date of publication 28 August 2013, republished 21 July 2015. 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?
Original date of publication 11 October 2013, republished 21 July 2015. 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
Original date of publication 13 November 2013, republished 21 July 2015. What is the difference between a subsidiary and a subsidiary undertaking? What is the difference between a holding company and a parent undertaking?
Original date of publication 4 November 2013, republished 21 July 2015. 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 w
Original date of publication 2 September 2013, republished 21 July 2015. 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?
Original date of publication 28 November 2013, republished 21 July 2015. 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?
Original date of publication 14 November 2012, republished 21 July 2015. 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 resoluti
Original date of publication 22 April 2013, republished 21 July 2015. I am acting for a company with modified Table A articles. The company has in issue 100 “ordinary” shares, plus 1 “ordinary A” share, ordinary B, C and D shares. The only reference to the rights attaching the A, B, C and D shares is in Form 128 – statement of rights attached to allotted shares – which states “Right to dividends only, as voted by board of directors”. There are no provisions specifically relating to these shares in the Articles. My question is whether this would be sufficient to ensure that the A, B, C and D shares do not carry a right to capital on winding up the company (which I believe was the original intention). Having looked at Article 2 of Table A, which applies to the company, it would appear that an ordinary resolution is required, to vary the rights attaching to any shares. On that basis alone, it would appear that the rights attaching to the A, B, C and D shares would be the same as those attaching to the other ordinary shares, if no ordinary resolution was in fact passed prior to the shares being issued. Would the shareholders be able to vary the rights attaching to the shares by passing an ordinary resolution at this stage to provide that the “alphabet” shares do not have a right to participate in the capital of the company on a winding up? I look forward to hearing from you with any comments.
Original date of publication 29 November 2012, republished 20 July 2015. If a board resolution and subsequently a shareholders' resolution approves a dividend which is found out to be unlawful, is the approval void or does the company still have to pay the dividend? I understand the position in regards to when the dividend is actually distributed, but what is the position before the distribution is made to shareholders?
Original date of publication 4 October 2012, republished 20 July 2015. 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?
Original date of publication: 23 November 2015. Republished on 20 July 2015. 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?
Original date of publication 24 January 2013, republished 20 July 2015. If a Company wishes to adopt new articles of association in which there are restricted objects, it appears that there is a requirement on the Company to lodge a form CC04 with the new articles of association and the filing copy of the adopting resolution. However, the CC04 form itself does not seem to provide for a situation where a company wishes to adopt completely new restricted objects within its articles of association. The Companies House form merely allows for alterations and additions to, or the removal of, existing restricted objects. Is the CC04 therefore the correct notice to lodge when filing completely new restricted objects?
Original date of publication 14 March 2013, republished 20 July 2015. I am amending the Articles of Association of two companies so that there are A Ordinary shares and B Ordinary shares. Must I produce new Articles or can I just make amendments via a written resolution? I recall doing this previously but I am not sure whether it is still ok.
Original date of publication 26 September 2012, republished 20 July 2015. 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.
Original date of publication 7 June 2013, republished 20 July 2015. Which provision of legislation requires the articles to expressly authorise the capitalisation of a non-distributable reserve (such as a revaluation reserve) into bonus shares?
Original date of publication 22 November 2012, republished 20 July 2015. I wonder if you are able to help with a query regarding the prohibition on a subsidiary holding shares in its parent? The initial circumstances were that S1 and S2 were shareholders in Company A. Company A had a minority holding in Company B along with other shareholders (S3 and S4). A reorganisation took place such that S1 and S2 transferred their shares in Company A to Company B. This resulted in Company B holding the entire issued share capital of Company A, but Company A continued to hold a minority shareholding in Company B. Therefore, there was a situation where a wholly-owned subsidiary (Company A) owned a minority stake in its parent (Company B). This happened when the Companies Act 1985 section 23 was in force. Section 23 of the CA 1985 states that a company cannot be a member of its holding company and any allotment or transfer of shares in a company to its subsidiary is void. Although there was a transfer by S1 and S2 of shares in Company A to Company B, Company B was not a “subsidiary” in terms of the definition in the CA 1985 (that is to say, Company A did not control the board of Company B as it only held a minority stake and no agreement was in place between Company A and any other shareholders of Company B regarding control). Therefore, the transfer by S1 and S2 would seem not be void in terms of section 23 of CA 1985. Nonetheless, as a result of that transfer, Com
Original date of publication 8 February 2013, republished 20 July 2015. 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!
Re. buyback of shares out of capital (ss 713-723 CA 2006) If a buy back of shares out of capital is completed (and the payment out of capital is made) after 7 weeks from the date of the special resolution is it unlawful? In this case it was done 7 weeks and 2 days after the date of the resolution (which authorised entry into the contract and completion not more than 7 weeks after passing the resolution). If it is unlawful, what are the consequences/implications, please? Is it void under s 658 CA 2006? Who could argue this – just the company, selling shareholder, potential future purchaser or a liquidator? Could it be ratified by a special resolution?
Original date of publication 3 April 2013, republished 20 July 2015. 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 happ
Original date of publication 21 November 2012, republished 20 July 2015. 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?
Original date of publication 6 July 2012, republished for technical reasons, without any changes, on 17 July 2015. When one company transfers its subsidiary company by way of a distribution in specie to another company, is stamp duty due? What should be entered in the consideration box on the stock transfer form?
Original date of publication 24 July 2012, republished for technical reasons, without any changes, on 16 July 2015. 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 relinquish
If a company has distributable profits in its previous year's filed accounts but begins to experience trading difficulties in the subsequent accounting year, are directors still permitted to declare dividends up to the value of the distributable profits in the previous year's accounts or should they refer to more recent management accounts given their knowledge that the company's trading environment has deteriorated since the end of the previous accounting year?
We are preparing a steps paper for a client to implement a group reorganisation and one of the steps is to capitalise some of the group companies capital contribution reserves. Are you able to provide details of the process and the documents required to effect this step please?
Under Group reconstruction relief (s.611 of Companies Act 2006) it is stated there is a relief from the obligation to transfer aggregate amount or value of premiums to the share premium account. If a wholly owned subsidiary avails of this relief, is there any obligation on the directors of the subsidiary to make a Declaration of Solvency regarding what is effectively a reduction in share premium?
Can a company buyback shares from a shareholder and hold them in treasury when the company does not have sufficient distributable reserves (i.e. negative profit and loss) but does have sufficient amounts in its share premium account? And is this done by way of shareholder approval?
In relation to the "financing of buyback" section under the drafting notes to your precedent "off-market purchase agreement: multiple completion" you state: "The completion of the purchase of each tranche of shares will be dependent on the company having sufficient distributable profits prior to the relevant purchase, or being able to fund the consideration by one of the other methods permitted by section 692, CA 2006 (for details of the requirements regarding the funding of a share buyback, see Practice note: private companies: financing the buyback). The company may want to make the availability of sufficient distributable profits an express condition to completion of each tranche in order to avoid the risk of being in breach of contract if it is unable to complete due to there being insufficient distributable profits. Alternatively, it may want to include wording such as that contained in optional clause 6 of this agreement which defers completion until the company does have sufficient distributable profits. The company may be comfortable that it will have sufficient distributable profits at the relevant time, or be willing to accept the risk of being in a position where it is unable to complete (without specifically catering for this in the buyback contact). Section 735 provides that, where a company has agreed to purchase its shares, it is not liable in damages in respect of any failure on its part to purchase any of its shares. This is without prejudice to an
Is it possible for a company to contain a provision in its articles of association to allow the directors to cancel a dividend (final and interim) after it has been declared but before it has been paid. If so, would you have any suggested wording for said article?
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.
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.
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?
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.
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 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.
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.
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?
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?
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
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?
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?
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?
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.
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 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.
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?
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
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)?
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?
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?
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
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'.
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.
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?
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?
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 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?
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.
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?
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?
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?
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?
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 .
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?
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?
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.
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?
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?
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.
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.
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?
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?
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
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?
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?
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?
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
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?
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 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.
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)?
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?
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."
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.
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?
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.
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.
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.
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?
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.
Tax advisers are proposing that we reduce the share capital of a company and create a reserve out of which we will issue redeemable preference shares. Is this possible? Do you have any precedents for this?
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?
In a share buy back, the shareholders of the company have signed the requisite special resolution approving the terms of the buyback agreement and authorising the buyback. This was done in mid May. The board of directors have delayed in convening a meeting to approve the terms of the buy back agreement and execute it - the buy back has not yet completed. There is no issue with the board approving it. They are meeting in the beginning of July. My question is, is there a time limit on the validity of the special resolution - ie does it expire after a period of time?
A public company limited by shares wants to issue dividend. Can we issue interim dividend by board resolution without a shareholder's approval relying on article 90(6) of Model Articles for Public Companies for 2006 Act?
If a holder of share warrants decides it does not wish to take up the option to subscribe for shares in the issuing Company, is the issuing company allowed to offer those share warrants to other investors? The warrant instrument to which the warrants are subject is silent on this issue.
We have a public company client who is looking to buy back some of its own shares. To assist in the raising of finance for it, a private subsidiary of it is making available security to the bank and the bank will be lending funds to the plc. Under the 1985 Act, this could have been whitewashed under the financial assistance provisions. s.681(2)(d) of the 2006 Act states that the s.678 prohibition does not apply to “…a purchase of shares under Chapter 4 of this Part” (i.e. purchase of own shares). Whilst this mirrors wording under the 1985 Act, lawyers then were of the opinion that that exemption did not extend to the giving of loans or security to facilitate the purchase and so the whitewash procedure was followed. The old Act had a documented whitewash procedure but the 2006 Act does not. In the absence of a statutory whitewash procedure, what is PLC’s position with regard to any whitewashing procedure that could be followed now? If there is no whitewash procedure for public companies, what is PLC’s position on relying on the s.681(2)(d) exception where loans and/or security has been given by company on a purchase of own shares?
If there is a discrepancy between a (public) Company's articles and Statute, which will take precedence? The discrepancy is whether working days are to be included when a notice is given specifying the time by which a person must be entered on the register if they are to be entitled to vote or attend. The articles state that the notice shall not specify a time which is more than 48 hours before the time of the meeting. Statute (Uncertificated Securities Regulations 2001/3755 s41) states that the time specified shall not be more than 48 hours before the time of the meeting BUT non-working days are not taken into account. The discrepancy results when the time 48 hours prior to the meeting falls on a non-working day.
Can you confirm your understanding of the reference to "value of 5% of its share capital" in section 692(1)(b)(ii) Companies Act 2006 as amended (allowing companies to complete small share buybacks from cash not identified as distributable profits)? I have assumed that this means 5% by nominal value (or amount paid up) not market value? If so then, given that the legislation permits purchases up to whichever is the lower of £15,000 or the value of 5% of share capital, it seems this provision will be of little use to most small private companies (which the legislation was aimed at). For example, a company with a paid up share capital of £1,000 would only be able to use the provision to fund a buy-back of up to £50. I note that the BIS consultation papers on the subject seemed to just refer to "5% of share capital" (which could have referred to 5% by reference to number of shares in issue) but the word "value" crept into the final legislation with little further explanation.
At an AGM of a public company, if the resolution to re-appoint the company's auditors is not passed by shareholders, what is the effect of this? Does this count as a casual vacancy for the purposes of s.489 of the Companies Act? Can the directors simply appoint a new auditor?
Hello, I was wondering if you could assist me with the following query. I act for an English plc whose shares are not publicly traded on an exchange. The company wants to make a tender offer to buy back shares. The offer will be made by a broker as principal and the company will then repurchase the shares purchased by the broker. The buyback will be an off-market purchase. I can see nothing in Chapter 4 of Part 18 of the 2006 Act that indicates that the broker must hold the shares (or any shares) at the time the contract is entered into or at the time it is approved by the shareholders. I propose to structure the transaction as follows: Tender Offer is made to shareholders by broker. Tender Offer closes and results are finalised. The buyback contract between company and broker is entered into setting out the number of shares to be purchased by the company from the broker and the price at which they are to be purchased. A schedule to the buyback will set out the names of the members holding shares to which the contract relates that the broker proposes to purchase under the tender offer. The purchase of the shares from the broker under the buyback contract will be conditional upon both: (i) the buyback contract being approved in general meeting; and (ii) completion of the purchase of the shares by the broker from the shareholders under the tender offer. The buyback contract with the broker is made available for inspection in accordance with section 696(2)(b). The b
If a person makes request for details of shareholders who have consented to be contacted by electronic means does this come under the requirement to disclose pursuant to S116 CA or can such a request be refused?
How specific does a restriction to a Companies objects under s31(1) 0f the 2006 Act need to be? If the Articles say: "The objects of the company are [LIST OF OBJECTS]", but without the words "only" "include" or any other qualifyer, would other objects be restricted?
Could someone please tell me if a private limited company has limits on it's borrowing powers? I understand that such limits are often stipulated in the articles but I could not find such a restriction in the model articles for private limited companies? Many thanks.
Please can you let me know whether a charitable company's articles and memorandum will be enough to make up its constitution so long as the charitable objectives required by law are included in the memorandum?
A private company with shares in issue in respect of three classes (A ordinary, B ordinary and redeemable preference) is making a rights issue only for holders of redeemable preference shares. Are class meetings/resolutions/consent required for A ordinary and B ordinary shareholders in respect of this rights issue to redeemable preference shareholders?
I met with a client who is wishing to return value to its shareholders. It is a private company. It currently has an issued share capital of c£100m (comprising A and B Shares of £1 each - all of which are issued fully paid up). It has been proposed by the client's accountants that each £1 share be converted into one share of £0.01. I am told that this will then create reserves which can be distributed in due course. This is different from previous reductions of share capital that I have undertaken so I would be grateful if you could let me have your thoughts on the proposed process. Also, as the B Shares are non voting - is it possible that this would constitute a variation of class rights?
I have been reviewing a company's records and I have noticed that the company approved a redemption of redeemable preference shares out of the proceeds of a fresh issue of shares and then that the actual redemption did not take place till 3 years later. The provision "out of proceeds of a fresh issue of shares" would suggest that the redemption should take place soon after the issue. In this case, it was 3 years later. Is there anything which specifically sets out a maximum timeframe between the approval/issue and the redemption?
Hello, I was wondering if you could assist me with the following situation. I act for an English plc whose shares are not publicly traded on an exchange. The company wants to make a tender offer to buyback shares. The offer will be made by a broker as principal and the company will then repurchase the shares purchased by the broker. The buy back will be an off market purchase. I was hoping you could assist with some issues: The contract with the broker will need to be on display at the AGM (and before at the registered office). I cannot think of a way around the fact that the broker will need to actually 'complete' the purchase of shares from the shareholders after the offer closes and the results are known but before the resolution to approve the buyback agreement with the broker is passed. This means that the broker will need to be the registered holder for at least 23/4 days (the period between the offer closing and the gm to approve the buyback agreement). If the resolution to approve the buyback contract is not passed, the company cannot buy them back from the broker. This poses obvious risk issues for the broker. Any shareholder whose shareholding has been extinguished as a result of the purchase by the broker will not be able to vote (obviously) so we will be relying on the votes of shareholders who have tendered under the tender off but still have shares left after the offer closes and those who did not tender. The broker cannot vote. Have you ever come ac
I am currently advising a group of GPs trading as a partnership under a partnership agreement. 2 of the GPs want to form a limited company to use as a vehicle to bid for another surgery. The new company is named 'xxx Health' and the registered office address will be the same as the practice address. The name of the limited company 'xxx Health' is very close to the name of the practice 'xxx Centre' and the practice has a recognised name in the area, so I would like to know if the partners that have formed this limited company can use the name of the practice in their company name? I guess there is the potential for a claim for passing off? Also, does it make any difference that they would be trading from the same address?
Following a fraudulent issue of shares, what is the proper procedure for returning those shares to the company? Should the fraudulent share holder transfer them back using a stock transfer form or should the buyback procedure be followed?
I am writing concerning the authority of a company to grant rights to subscribe for security into shares in the company. Specifically, a company has passed a s551 resolution giving the directors the authority to allot shares/grant rights to subscribe to shares. The company had granted the full amount of rights to subscribe to shares (through option agreements) as was permitted. One of the option agreements had partially been exercised. A situation has occurred that means that under that option agreement the individual can no longer subscribe for the rest of the shares. This means that without issuing a fresh option agreement, the full number of shares authorised for allotment under the initial resolution cannot be subscribed for. The company is looking to 'refresh' this option agreement i.e. issue a new one for the amount that can no longer be exercised under the first agreement, so that the individual could once again subscribe for shares up to the amount originally permitted. Would it need to pass a new resolution giving fresh authority to allot as initially the amount of options granted covered the full issue of shares? Or would the original authority cover this 'refreshing' of the option agreement as the full value of shares cannot now be exercised under the first agreement and the new option would only cover the amount that cannot now be taken under the original option agreement?
Would it be possible to attach an expiry date to deferred shares such that the deferred shares will extinguish by a specified date? If so, presumably the issued share capital of the relevant company will be reduced by the relevant amount?
Can a company convert from unlimited to limited if it has already been limited at some stage? I don't think this is possible. Also, if a limited company owns a shareholding in an unlimited company, it will be liable for the unlimited company's liability. Is there any way that a parent company of this limited company could be liable?
What would be the procedure for cancelling 40,000 preference shares in a private company now which are currently redeemable after 2015? It is agreed that the holders will not receive any consideration.
I am instructed by two clients in relation the redeeming of shares and a buy-back of shares. The two transactions are completely non related. Both clients intend to fund these transactions by way of loans to the companies either personally or from a bank. Normally these sorts of transactions are done via distributable profits or payment out of capital. Are the proposed methods via a capital loan permitted?
I am acting for a private company, whose original articles of association provided for a quorum of one director, the articles were later amended to have a quorum of two directors. Recently one director resigned and the company now have only one director. The company now wants to amend the articles to have a quorum of one director and then liquidate the company. Can both tasks be completed simultaneously or should we amend the articles to then approve the liquidation of the company in a separate meeting? Please can you provide a quick step plan to accomplish the task and provide any draft resolutions on the PLC website.
I currently have a client who is incorporated under Companies Act 1948 and has the Table A Articles from that Act. In the articles, there is no provision for directors to approve accounts. Accordingly, will my client still have to approve the accounts under section 414 of CA 2006 or will the 1948 Table A articles prevail?
In the above document, it says (at Membership of guarantee company) that 'unlike a company limited by shares, a company limited by guarantee is not under an obligation to issue membership certificates.' Please can you confirm the statutory basis for this?
I am acting for a company that has an unwieldy number of shareholders of four separate classes and denominations of shares, but all ranking pari passu. The clients want to consolidate into a single class of shares of a higher denomination (i.e. £1 instead of 1p) but this will result in fractional adjustments. I have read the briefing note on consolidation and subdivision of share capital but this does not answer my question. What I need to know is if every hundred shares of £0.01 is being consolidated into a single share of £1 and if one particular shareholder has an odd five shares (for example) is it possible to resolve by Ordinary Resolution, that any odd fractions are simply rounded up to the nearest 100 so that they get a full share? Technically, this is prejudicial to those who have round numbers but can it be done by simply wording the same resolution as the consolidation resolution?
A company is proposing to buy back the shares of several shareholders at the same time. We understand that a shareholder is not eligible to vote on the resolution to authorise the buy back of his own shares. However, is he required to approve the resolution to buy back the shares of the other shareholders whose shares are being bought back at the same time?
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.
A company, P Limited, has 2 trading divisions which are contracting and software. P Limited plans to issue shares to 2 employees who work in the software division to reward them for their hard work. These shares once issued will represent approx 10% of the issued share capital. I am told that these new shares will not be voting shares and only entitle the holders to (i) a fixed dividend based on any net profit the software division makes subject of course to their being sufficient reserves (ii) a share of any consideration if the entire share capital company is sold, probably linked to the value to be apportioned to the software side so in other words if the total consideration is 1m and the value attributable to the software side is 750k, then these shares will entitle the holders to a share of the 750k and (iii) a similar right as in (ii) if the whole business is sold - thus a return on capital after the company has paid all its liabilities but only to the software side. They are not keen on splitting the divisions into 2 separate companies. I can possibly see some complications ahead. I am aware that new bespoke Articles would be required detailing the exact rights attaching to these shares. The directors would need to have authority to allot the shares and disapply any pre emption rights too. None of that will be an issue I understand. I am not sure if a shareholder agreement will be entered into - possibly not. Do you see any other issues in setting up a
I have a query regarding the removal of a company secretary all together as provided by the 2006 Companies Act. The Company is limited by shares with articles under the 1948 - 1976 Acts. In the articles it states subject to s 21(5) of the 1976 Act there shall be a secretary appointed by the directors. However, I understand under part 12 of the 06 Act the obligation for a secretary has been removed. How is this procedurally done? Is it necessary to change the articles using section 21 of the 06 Act? There is no mention of the need for a secretary just that a secretary "shall" be appointed upon such conditions as they think fit and any secretary appointed may be removed.
I would be grateful for your thoughts on the following. Where there has been an intra-group dividend (UK companies) of £1 which is subsequently treated differenly for accounting purposes (now treated as a £100m dividend) how should this be approached by the company - do they have to ratify, hold new board minutes, notify shareholders etc?
I am researching the ability to use a purchase price adjustment mechanism in relation to a share buyback, but have never come across this being done before. If share buyback consideration is calculated on the basis of estimated figures (net asset value/excess cash etc)and then a post-completion true-up is carried out via completion accounts, what is the effect on the buyback? If additional consideration is required to be paid, would this need to be paid out of distributable reserves? Would additional Stamp Duty be payable? If the price paid was over-estimated, do you see any issues with the Company clawing back part of the consideration paid?
What is the remedy for a shareholder if the Company fails to adhere to the rules in s292 and s293 of the Companies Act 2006, namely, failing to circulate a written resolution produced and asked to be circulated by members holding over 5% of the Company's shares?
Does a bonus issue of shares have to be issued to all of the existing shareholders or can a company choose which shareholders to issue bonus shares to? Presumably unless shares are being issued for some other form of non-cash consideration then a bonus issue can only be made if there are reserves? Do you have precedent documentation on PLC for bonus issues?
Our company has paper statutory books and whilst I understand that it is a requirement of the Companies Act that the Statutory Registers of a Company must be kept at the registered office and be available for inspection can the overfill from the statutory books, correspondence with Companies House, directors and board packs etc., be archived offsite if older than six years or should they be kept at the registered office for the life of the Company?
If we wish to change auditors of a plc what wording do we use in the shareholders' resolution? I can see wording for appointing new auditors but how do we incorporate the information that the old auditors have resigned in the shareholders' resolution and the notice of the General Meeting to the shareholders?
Please can you tell me how a company limited by guarantee becomes a subsidiary of another company. I know that companies that are limited by guarantee don’t have share capital so I’m not quite sure how this is done.
If a company wants to change its articles by a written resolution (as opposed to a resolution passed at a general meeting), then is it properly passed if the holders of only 75% of the voting shares sign the written resolution?
Does a transfer of shares in a company always need to be at full market value or is a shareholder free to agree such commercial terms (including consideration) for a transfer as he sees fit? A client is looking to transfer shares in a family business to his daughter - can he do so at nominal value or is 0.5% stamp duty payable on the market value of such shares?
We are acting for a small family company which has issued shares to the majority shareholder's grandchildren, all of whom are under 18. Having become aware of potential problems with this, the family now wish to transfer these shares into a trust for the grandchildren. I have been looking into the best way to do this but would appreciate any information you have. The options I've come across are: 1. Repudiate membership. Would this simply involve the child declaring that they surrender their membership in the company? What would happen to their share as a result? 2. Transfer of shares. I have seen that a court order is required for this, showing that the transfer is in the child's best interests. Is this always necessary, ie. would it be so in this case when they will still remain beneficial holders, and what how is the court application made? 3. Company buyback. A possible alternative is for the company to buy back the shares. However, this still requires a contract which the parents would presumably have to sign on their behalf or which might otherwise be voidable? Would the court order also be required in this case? Any help you can provide would be useful.
We act for a FTSE 350 company whose AGM is due to take place in July 2013. The Annual Report, accounts, Resolutions etc are to be sent out at the end of June 2013. At the AGM all of the Directors will stand down and be nominated for re-appointment. There is a possibility that the company may appoint a new Director in July of this year and the query is what is the best way to deal with in terms of him standing down and being re-appointed as the resolutions will have already been circulated to the members and the Director will not have been in office at that time so no resolution can have been proposed in respect of him? Does he have to step down?
We have a Charity that was set up as a company limited by guarantee in 1998 with a secretary, 2 directors and 4 subscribers. There are Memorandum and Articles of Association covering the usual areas of how members and directors/trustees are appointed/terminated etc. Companies House now shows only who the current directors and the secretary are and states that there is "no list of members." The current directors/trustees have no idea who the members are and have no list of members. (In their words – “there are no members, just the directors/trustees”) They never have (while they have been involved) had any member meetings etc. just director/trustee meetings. Questions: 1. How do we determine who the current members are? Is it still the initial subscribers? Are there no members? 2. Is it possible to have no members?
My client, a wholly-owned, single-member public limited company (the "Seller"), intends to transfer the shares in its wholly-owned private subsidiary to subsidiary of its parent (i.e. a sister company). My understanding is that, if that sale is conducted at a price lower than the market value of the shares in the target subsidiary, the sale will be classified as a distribution under the Companies Act 2006 and/or the principle in Aveling Barford. The Seller intends to conduct the transaction at market value. The price will be paid in cash. Although it would be useful or, indeed, advisable to obtain a valuation of the assets to confirm this, my understanding is that, in these circumstances, there is no legal requirement (either under common law or the Companies Acts) to obtain a valuation to confirm that the sale is being conducted at market value. Is that correct? In any case, in order to be on the safe side, the Seller wishes to ensure that it does indeed have distributable reserves at the time of the sale so that, in the unlikely scenario that the price for the sale is successfully challenged as being below market value, and the sale is therefore a distribution, it can justify that distribution. (The sale will certainly be for book value or greater, so it will only need to demonstrate distributable reserves of at least 1p.) I am aware that, if a company wishes to make a distribution, it must justify the distribution by references to annual or interim accounts.
Is PLC planning to update their standard articles of association in light of the fact that provisions of the model articles on mental incapacity are being repealed under the Mental Health (Discrimination) Act 2013 in April 2013?
Please would you be able to provide me with a comprehensive list of companies that have amended their articles between 2011 and now to increase the cap on directors' fees? Your help is much appreciated.
I have a question regarding a company having different classes of shares in issue. The purpose of having two separate classes of shares for this client is to ensure that different dividends can be declared for each class of share. The articles contain the following provision in relation to the share capital: 1.1. The share capital of the Company shall comprise of A Shares and B Shares. 1.2 The A Shares and the B Shares shall constitute separate classes of shares with the rights attaching to them provided in this Article 1. 1.3 The A Shares and the B Shares shall: 1.3.1 entitle the holders to receive notice of or to attend or vote at any general meeting of the Company or to receive a copy of or to vote on any written resolution of the Company; 1.3.2 entitle the holders to participate in any profits of the Company available for distribution; and 1.3.3 entitle the holders to participate in any return of assets of the Company, after payment of its liabilities, on liquidation or capital reduction or otherwise. There is no express provision in the articles stating that different dividends may be declared in respect of the A Shares and the B Shares and there is no provision prohibiting it either. In this situation, do we need an express provision confirming that these two classes of shares can have different dividends declared in respect of them?
My client is a private company limited by shares with 1 million issued shares or 1. The issue of a further 500,000 shares has been authorised. The client has cashflow issues and there is a consortium of investors looking at purchasing 500,000 shares. They do not want to purchase the 500,000 authorised shares as this will not give them control. However, as one member of the consortium already has some shares, if a new class of shares is created and 500,000 of these "B" shares - which will carry 2 votes per share - are issued, they will have control. I would be grateful if you could provide guidance as to whether there could be any issues involved with this and on what will be required to make this effective.
We are in the process of updating a company's articles which were incoporated under the Companies Act 1948. I'm aware that under section 28 of the Companies Act 2006, provisions of the memorandum of association (that are not of a kind prescribed in section 8 of the Companies Act) are deemed to be incorporated into the provisions of the articles. However, in practical terms, would we need to do anything in relation to the memorandum of association, other than, when drafting the special resolution enacting the adoption of the new articles, stating that "the draft regulations attached to these written resolutions be adopted as the articles of association of the Company in substitution for, and to the exclusion of, the existing articles and memorandum of association of the Company”? I have read on an answer to another question to the team that "You could add a footnote to the original memorandum of association to state that those provisions deemed to be in the articles of association under section 28 are now contained in the articles of association of the company adopted by special resolution on [date] 2010." However, in order to add this footnote, would a special resolution need to be passed or would it simply be a case of adding the footnote to a copy of the memonrandum in its current form? Finally, would all this apply if (i) the model articles were being adopted with some amendments, or (ii) if just certain of the articles in their current form were amended?
A company has Voting Redeemable Preference shares which were due to be redeemed later this year. It is apparent that the company will not in the foreseeable future have the funds to redeem and the company and shareholders have agreed that the Voting Redeemable Preference shares be converted to Ordinary shares. My understanding is that there isn't a step that will enable the shares to simply be converted i.e resolve so that VRP shares are now Ordinary shares, and the way to achieve the required outcome is to rename/redesignate the share as Ordinary shares and vary the rights so they match the Ordinary shares. This would require a resolution, changing articles and filing SH08 and SH10.(Also obtaining class consent) I'd be grateful if you could confirm that this approach is right and that there isn't a simple "magic wand approach" which converts the shares in one process! Also, there are 73 million Voting Redeemable Preference Shares that are authorised, although only 72,062,229 are issued. Given that the resolutions dealing with the conversion (redesignation/Variation) of the issued shares also included the adoption of new articles (and so concept of authorised capital disappears) presumably any resolution does not need to state that the authorised but unissued shares will no longer exist after the conversion? Hope you can help clarify.
In your view should a form SH12 (and/or SH08) be completed to record a variation of class rights when shares of a previous class are divided into a number of new classes, and provision made for dividends to be paid to some or all classes ? The form SH08 does not seem to anticipate that only some of a class will be re designated e.g. of 100 A shares 25 remaining A shares, 25 becoming B shares and 50 becoming C shares - do you have an opinion on whether the number of shares concerned should be typed into the form ?
I note that under the Companies Act 2006 (s558) shares are deemed allotted when the member requires the unconditional right to be included in the register of members. However, companies have two months to register the allotment. If the directors approved an allotment and the conditions of that allotment had been met (application received, moneys received, board approved etc) on a given date but the allotment was not registered in the register of members until up to 2 months later, what would the date of allotment be in the register of members - the date that the board approved the allotment and the conditions were met or the date that the register is actually updated? In other words, if updating the register of members after an allotment has taken place, what date should be used in the register?
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.
If a company incorporated under the Companies Act 1985 with one class of share passed resolutions to limit its share capital to a set amount and also adopt new articles (which do not mention a cap on authorised share capital, do they need to pass a resolution to increase its share capital if they wish to exceed the limit in the resolution and allot further shares? The confusion is arising from the fact that the limit is in a resolution passed by shareholders rather than as part of the articles.
I am acting for an exiting shareholder in a proposed company share buyback with multiple completions over 1-2 years. The bank has 1st charge over the company and I am looking for something better than a 2nd company charge by way of security for my client. It is proposed that a personal guarantee be obtained from the remaining majority shareholder (guaranteeing distributable profits at any completion point). Do you have any guidance on this?
The heading of section 338 Companies Act 2006 refers to Public Companies. This section has replaced sections 376 and 377 of the 1985 Act which applied to companies limited by guarantee. These sections refer to members’ power to require circulation of resolutions for AGMs. Does section 338 Companies Act 2006 apply to members of a company limited by guarantee in relation to this power or just members of public companies? In other words, do members of a company limited by guarantee need to obtain the backing of 5% of the membership in order to propose a special resolution at the AGM?
Unless prohibited by the company's articles of association, under section 550 of the CA 2006 the directors of a private company with only one class of shares have the power to allot shares of that class without requiring prior shareholder approval. A prior authority is required if the directors cannot rely on section 550 of the CA 2006 (or the allotment or grant of rights does not fall within one of the limited exceptions) and will therefore be relevant to a private company with more than one class of shares. Does the requirement for prior authority apply without exception where there are two classes of shares (Ordinary and Deferred), notwithstanding that the Deferred Shares do not ordinarily have a right to vote on any matters?
Please could you confirm whether it is possible for a Company limited by guarantee to amend its statement of guarantee so as to decrease the amount which each member guarantees? I am assuming that to do this, a special resolution to adopt new articles/ amend the articles would be required. Is this correct? I note that there does not seem to be an equivalent of a statement of capital to file at Companies House with regards to the amended statement of guarantee. Please could you confirm that this is correct?
Under the Companies Act 2006 is a private company entitled to cancel any shares which have not been taken up or agreed to be taken up by any person and to diminish the amount of its capital by the amount of cancelled shares accordingly? If yes, can this be done by ordinary resolution? It is understood that this was possible under section 121 of the Companies Act 1985.
I note your comments with regard to multiple completions under the same buy back agreement. A client’s accountants have structured a deal that involves an unconditional buy back agreement entered into now providing for multiple “Completion Dates” over the next 12 months where the beneficial interest in all of the shares must pass on the signing of the agreement and the legal interest will transfer with each tranche of shares to be re-purchased on each Completion Date. The Company has substantial distributable profits compared to the amount being paid on the proposed buy-back so there should be no issue with not having sufficient distributable profits come (e.g.) months 11 and 12. The first question is whether one shareholder approval at the outset is sufficient or whether shareholder approval is required ahead of each Completion Date? Secondly, if the contract can be done in one contract with one shareholder approval at the outset, presumably an individual SH03 needs completing, stamping and filing after each Completion Date with an appropriate SH08 following each Completion Date. Is this correct and is there anything else that needs to be done (save for depositing the contract at the registered office for 10 years etc) in this type of situation compared to one where all the shares are re-purchased at the same time in one transaction?
Our Japanese shareholder wishes to have money returned from our company. We are wondering whether we should go with reduction of share capital or dividend payment. What are the advantages and disadvantages of paying a dividend as opposed to returning monies to shareholders by way of a reduction of capital?
I have a client who has entered into an agreement with a company and who are the trustee of a charity. The company have essentially stated that the agreement is unenforceable by reason of the fact that it is ultra vires. Whilst recognising the limitations in the Companies Act about the authority of directors of charitable companies, I am unclear as to whether these limitations would also apply to a company acting as a trustee and which is not itself a registered charity? In other words does the fact that a company acts as a trustee mean that it can avail itself of the provisions of s.42 of the Companies Act?
Can a private Ltd company enter into a single unconditional contract for the purchase of one of its shareholder's entire shareholding over a 2 year period, where its a buy-back out of distributable reserves? Thereby, buy-back of different tranches of the shares by installments? Am I right in thinking that ownership (legal & beneficial) will not pass until the date on which the relevant tranche of shares is purchased? Are there any additional legal requirements to consider 'over and above' standard off-market arrangement?
We are considering options for acquiring an investor's shares in our client's company (we act for the founders). The deal proposed is a payment of, say, 1 million now followed by 300k in a year's time. We only have cash available now of 1 million. The simplest option in the circumstances would be a share buyback, however, deferred payments are not permitted. Is it possible to issue loan notes for the 300k? I assume that, if we were able to pay out 1.3 million cash and then receive 300k cash back as a loan, there would be no problem. Ideally, however, we would only pay out 1 million cash and then issue loan notes for the 300k without actually paying the 300k cash out. Would this be permitted?
We act for a company with two classes of share in issue - A and B ordinary shares. Some (but not all of the) A ordinary shares are being transferred to a person who is not an existing shareholder of the company. The existing articles provide that "...A Ordinary Shares will, if so required by the A Shareholder by notice served on the Company, immediately and without resolution of the Directors or the Members be converted into B Ordinary Shares upon being held (whether by virtue of a new issue or transfer of such A Ordinary Shares or otherwise) by any person who is not a holder of any other A Ordinary Shares". The A Shareholder wishes the shares to be converted to B Ordinary Shares on being held by the new shareholder. What if any shareholder resolutions need to be passed and what forms filed at Companies House? We don't think a shareholder resolution or class consent need to be passed as the articles provide for automatic conversion so our view is that the shareholders have consented already to the conversion - do you agree? Does a form SH08 need to be filed as it isn't a new name - it's one existing class being converted to another and the rights will be as per the existing B Ordinary Shares rights set out in existing articles. And can a Form SH08 be filed in any event where only a certain number of shares of a class are being converted from As to Bs and the other existing A Ordinary Shares will continue to exist? The wording on the Form SH08 suggests it's to be
Our client, which is a private limited company, has partly paid shares in issue to one shareholder. These were £1.00 shares of which 1p has been paid. There was also a premium of which only 1% has been paid. Can we use a procedure whereby the company calls for the unpaid amounts to be paid in circumstances where we intend that this will not happen so that the shares are then forfeited and the directors agree not to pursue the debt against the shareholder? Is this a breach of the directors’ duties and in the event of insolvency would this transaction be valid? Further, the intention would be to sell the shares back to the same shareholder at par (without a premium). Would this constitute a reduction of share capital? What are the alternatives?
I act for a residents management company which is currently registered as an unlimited company. The residents wish to re-register the company as a limited company (either by share or guarantee). Does the re-registration process alter the company to the extent that any rights it has the benefit of need to be re-granted or assigned or does the status of the company change only and all rights and oblgiations of the company remain?
I understand that one difference between a final and interim dividend is that a final dividend becomes a debt owed to the shareholders when it has been approved by them, whereas if the directors approve an interim dividend it is only payable when it is paid. On this basis does that mean that an interim dividend approved by the directors is not enforceable and would not be recorded in the accounts of the company paying the dividend as a debt if it had been approved but not yet paid? A related question is how a preferential dividend included in the articles would be treated. The articles state that a preferential dividend is payable each year if confirmed by the directors. If the directors do not confirm in a given year then the dividend is not paid and is not cumulative. Would a dividend approved by the directors but not paid be enforceable and recorded as a debt owing in the accounts of the company paying the dividend (on the basis that it is in the articles which the shareholders agree to)?
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?
If a company has two different classes of shares in issue, but the articles of association are silent on the rights of those shares, what would the position be in relation to the company declaring a dividend? Would the company be able to declare a dividend to one class of share, but not the other?
My client is intending to purchase assets from a company, to include its name. The company name has the word 'British' in it, which is a sensitive word when incorporating a company and would necessitate an approval process before being accepted by Companies House. The target business has been trading through its company name for a number of years. My client will incorporate a new co and change its name to the target name on completion. Will consent/approval be needed from Companies House to use the target name or does this not apply for transfer of a name?
Companies Act 2006 section 691 states that where a limited company purchases its own shares, the shares must be paid for on purchase. My question relates to the meaning of "paid for". Does it have to be in cash, or does it work if the payment is by the issue of a loan note, redeemable at a later date?
Is it possible to effect a share buyback for nil consideration? For example, can the company re-purchase its own shares for a total consideration of 0? This would be to get around the problem of the company having no distributable reserves.
In your note on intercompany reorganisations in the box on distributions in kind (Practice note, Intra-group reorganisations: overview: Returns of capital and distributions in kind), you state: A. "It is generally accepted law that the transfer of an asset to a company controlled by the transferor's parent for less than market value also constitutes a statutory distribution, although this is not confirmed by the 2006 Act." B. "This being so, it follows logically, and is accepted, that such transfers are subject to the statutory rule that distributions must be made out of profits available for the purpose." Please can you indicate the authority for statements A and B above? Also, what is your definition of "control" for this purpose?
We adopted new Articles of Association in 2010. Can you please confirm whether we need to include within our new Articles any resolutions passed before the adoption of the new Articles in 2010 and whether we need to show the Memorandum of Association at the beginning of our new Articles (i.e. only showing the details of the original subscribers) pursuant to section 28 Companies Act 2006?
If a buyer's protection under a call option agreement is breached by a seller, by selling the option shares to a bona fide purchaser who purchases the option shares in good faith, is this sale overreached by the buyer? Or would the buyer's only course of action be a claim for damages?
I am acting for a small private limited company which was incorporated prior to the Companies Act 1948. The articles of the Company require auditors to be appointed by the Company every year at its AGM. The articles also require that at least once a year the accounts of the Company be "examined and the correctness of statement and balance sheet ascertained" by the Auditor. These are special articles rather than requirements incorprated by the old Table A regulations. The Company would otherwise qualify for exemption from audit and be able to file abbreviated accounts under the relevant statutory provisions of the Companies Acts 1985 (as amended) and 2006. Do these statutory provisions override the requirements of the articles or will the articles need to be amended before the Company can take adavantage of the statutory exemptions? The directors have assumed that the statutory provisions would apply and so for the last few years have not had the accounts audited, and have filed abbreviated accounts. I cannot see that the statutory exemptions are qualified so as only to apply if the articles do not provide otherwise. If the articles should have been amended, would revised accounts (with an audit report) have to be adopted by the Board and filed for the preceding accounting periods or would it be sufficient for the members to ratify the previous unaudited accounts when any resolution to amend the articles is proposed and passed? The articles only require that the
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.
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?
I have a question regarding the position where a company has not validly passed a written resolution. The company in question had two shareholders (50/50 split) and wanted to amend their original articles (based on Table A, as in force in October 2006). A written resolution was signed by only one of the shareholders. However, notice was filed at Companies House stating that a resolution was passed amending the articles with a copy of the amended articles. The question is, do the amended articles bind the company and its members or do the original articles still apply (for our purposes it is preferable if the original articles apply)? I assume the latter as the resolution has not been formally passed and therefore Companies House should be informed and the register rectified but cannot find anything to confirm this.
Are the words "Limited" and "Ltd" interchangeable when referring to a company name? My client is registered as "X Ltd" but on a facility letter it has been referred to as "X Limited". I am preparing an amendment letter amending the terms of the facility and wondered whether I should address the name issue at the same time?
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?
The Companies Act 2006 does not specify that subscriber shareholders must receive share certificates. Assuming a subscriber shareholder does not have a share certificate, upon a transfer of this subscriber share, should there be an indemnity (similar to a lost share certificate indemnity) or can this be dealt with in board minutes (i.e. to note that subscriber share certificates have not been issued)? Otherwise, should a share certificate be issued in respect of the subscriber share, prior to the transfer of the share?
If a limited company wishes to enter into a derivates deal (e.g. commodities hedging)does it need to have specific authority to do this in its Memo and Arts? If it does need this specific authority, and this is not contained in the Memo and Arts, should the Memo and Arts be amended by way of a members' resolution before the limited company can carry out derivative transactions?
Before a company secretary is appointed, does that person need to write to the company confirming that they agree to such appointment? Is board consent approving the appointment of a company secretary required from the ultimate parent company before the subsidiary companies can appoint the same person as company secretary for those subsidiaries? What happens if another person is to be appointed as company secretary for the subsidiary companies only? The question may quite simply be: does each corporate entity have the power to appoint a company secretary regardless of where they sit in the corporate structure or is consent needed from "top co" first?
We wish to transfer a number of subsidiary companies from one intermediate holding company in the group to another. We would like to make the transfers at book value, although the current parent does not have positive reserves. Presumably, this does not raise an issue of a deemed distribution as no parent is involved? Do we risk the transactions being treated as being undervalued in any other respect?
Please can you give me some guidance/practical examples as to how the information required to be given in business e-mails might be given by a business where it trades through a number of group companies, where emails may be sent by employees who correspond either on behalf of a particular trading group company, or whose position is group-wide (where functions are centralised)? The trading companies within our group use the same trading/brand name and we should like to be able to use one notice/disclaimer for all emails if possible, albeit I understand that the information given should enable the recipient to identify which legal entity the email is sent on behalf of and that the email should contain the requisite information in respect of that entity.
We are continually being contacted by an agent working on behalf of a PLC with Section 793 notices for a number of securities we hold demanding replies within 48 hours. I provided the details in November 2012 but they have contacted me again. We are aware of the need to comply with these requests but is there a limit to the frequency? Monthly appears to be excessive when there is minimal movement in our holdings. We are discretionary investment managers and hold less than 0.5% of the issued share capital on behalf of underlying investors.
If the authorised share capital of a company is increased by special resolution of the members, and such share capital resolved to be divided into ordinary shares and preference shares, do the Memorandum and Articles of Association likewise have to be amended by special resolution to indicate the new amount of share capital and that there will be two classes of shares?
A client company proposes to allot shares to management. All of the managers except one will be paying the subscription price in full. The other manager will only be paying a proportion of the total subscription price on completion. Provided the directors have authority to allot shares on such terms as they think fit, is there any reason why a proportion of the shares cannot be allotted as fully paid and the rest as nil paid (as opposed to the amount being paid on allotment being divided equally amongst the total number of shares issued to the manager in question)? This would certainly be cleaner in terms of completing the Form SH01 as the alternative would be to allot certain of the shares as partly paid as to an awkward percentage amount. The client has been made aware of the fact that there will almost certainly be a benefit in kind to the extent that any proportion of the subscription price is left outstanding otherwise than on the terms of an arm's length commercial loan, albeit that tax is excluded from the scope of our instructions. In these circumstances, would it be more usual merely to allot the shares nil paid as opposed to loaning the subscription price to the manager in question and setting out in writing the terms of the loan? It is my understanding that unless the company has a consumer credit licence, then it is potentially infringing the CCA if it makes a loan which is potentially repayable after 12 months.
In a private equity transaction, if Holdco Limited (a UK company) provides an interest free loan to its shareholder (which is a foreign fund or LP) would this be viewed as a deemed dividend? If it was, this would obviously be a problem if there were no distributable profits in Holdco. In other words, would the loan need to be on "commercial terms" (i.e. market interest rates) to avoid being declared a dividend?
Section 629 of the 2006 Act states that shares are of the same class if the rights attaching to them are in all respects uniform. In light of this, would you agree that if you have shares in one company which are denominated in different currencies (but there is no differentiation between the rights attached to them in the articles and they are both described as ordinary shares), that they would constitute one class of shares for the purpose of section 629?
If at the point of declaration of a dividend, a company had sufficient distributable reserves to pay a dividend (by reference to the relevant accounts and considering any post balance sheet events), but an event subsequently occurs which results in the company having insufficient distributable reserves at the point of payment of the dividend, does it have to stop the payment?
A company can only declare a dividend if the company has sufficient distributable reserves to pay the dividend. Where shareholders have preferential redeemable shares, can a dividend be paid without redeemable reserves?
What is your interpretation of "paid according to the amounts paid up on the shares" in the context of the amount of dividends? Is it the amount of nominal paid up or would you interpet it to include any premium payable on a share? Logic suggests it must be the nominal but are you able to point us to any basis for that, or do you disagree?
Re: Regulation 10 of The Companies (Trading Disclosures) Regulations 2008 (SI 2008/495) which (a) refers to a criminal offence and (b) refers to the company and the officer in default being liable to a fine: Does being gulity of a criminal offence, mean the culprit has a 'criminal record'? I am not sure what a 'criminal record' means. What is the amount of the fine? Is it a repeat fine? Please identify the legislation from which your response derives.
I have been trying to put together an overview of share buyback requirements for plcs - in particular regarding the rules in terms of funding (ie by loan or share subscription). More specifically however, I was trying to find information on whether there are any restrictions on a plc buying back its own shares given that it is in CVA?
I act for a client company who has issued two classes of redeemable preference shares. The client company now wishes to issue debenture stock and issue that stock to the preference shareholders as consideration for the redemption of their shares. The intention is that one class of preference shares will be redeemed upon completion, with the other class of preference shares being redeemed on a staggered basis. How should this be documented? Would it be considered a buyback of shares? How would it be classed as being financed?
I act for a company that owes a substantial sum of money to another. It has been agreed that the creditor company will swap its debt for one share in the debtor company. I need to know the resolutions to be passed and whether a formal agreement is required. I suspect that a shareholder agreement will be necessary. Can you direct me to the form of documents required?
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?
This article - Company secretary: appointment, role and responsibilities - states that the directors can terminate the appointment of a company secretary without shareholder approval, but gives no authority for this. Is there statutory or caselaw authority for this? If so, what is it?
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?
Are there any statutory requirements regarding meetings of holders of loan notes? I am assuming that as long as the terms of the instrument constituting the loan notes are complied with in this regard, then that is sufficient. I would therefore propose using as a starting point shareholder general meeting notice, etc documentation, stripping out any of the statutory requirements in relation to shareholder general meetings, to the extent that these are not also required by the instrument. Does that work in your opinion?
For a company we have an ordinary and a preference shareholder. We would only like to pay the dividend payment to the preference shareholder. What do we need to do, regarding the ordinary shareholder - will their entitlement need to be waived? Secondly, we would like to pay a dividend to the parent but would like the distribution to go to the shareholder's 'Ultimate Parent', what do we need to ensure this can happen?
I know that the Companies Act 2006 permits a company to have a single member. If the Articles of a company incorporated under the 1948 or 1985 Companies Acts requires there to be two or more members of the company- does that restriction rule or is it superseded by the change in statute?
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?
In a company own-share purchase where the company does not have sufficient distributable profits on completion, is there another way of completing the transaction other than the single contract, multiple completion route? The deferred payments would be over 4 years, so the multiple completion route is very cumbersome. There is another method that has been discussed which involves forming a holding company/separate company? Do you have any further advice on this?
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?
One of our clients is listed on AIM and is looking to amend its articles of association to reflect any developments which have taken place since 2006. The company's current articles were put together in 2006 and comply with the Companies Act 2006, as it then stood. Therefore my question would be, do you have a list of changes to a company's articles which may be required, assuming that the company is listed on AIM and its most up to date articles are from 2006? For example, I believe that one such change would now be for the provision of short notice of AGMs (from 21 days to 14 days).
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 notice that there is a civil penalty for late filing of accounts. Is there an equivalent civil penalty/fine for late filing of other documents, such as a return of allotment (apart from the potential criminal fine)?
Please can you confirm how you alter the articles of association of a company limited by guarantee? As you state on here, s.21 of the Companies Act 2006 states that it must be done by special resolution. But please can you confirm who passes the resolution and who would therefore sign the written resolution off?
Is it possible for a UK subsidiary to hold shares (minority interest) in its parent company (also a UK company)? The period of time in which the holding will exist is short. The shares will probably be cancelled and the subsidiary wound up.
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.
Does a director of a private limited company have a separate right to view, and copy, the register of members of that company beyond that set out in CA 2006, section 116(1)(b)? Does it make any difference if the register of members is kept at a SAIL which is a private address?
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?
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?
Is there a finite period in which a dividend for a particular financial year has to be declared? For example, a company's year end is 31 December. It accounts for the year to 31 December 2011 are settled and signed off 31 March 2012. A distributable profit is showing. If a dividend is to be declared, does this have to happen by 30 June 2012, 31 September 2012, 31 December 2012, etc?
Is it possible to adopt a new set of revised Articles of Association for a company limited by guarantee (no issued shares) incorporated under the 1985 CA? If so, is this done by way of a members' meeting either to affirm a written resolution or to pass a special resolution?
With respect to a company limited by guarantee, what must be approved (a) by the board of trustees, (b) by the member(s) at a general meeting or by member written resolution, and (c) for completeness (although I understand that an AGM is not mandatory), by the member(s) at an AGM?
We have a company that has two different classes of shares, with the rights of both being varied upon the adoption of new articles. All the shareholders are signing the written resolution in relation to the adoption of the new articles. The usual statutory requirement is that the consent of holders of 3/4 in nominal value of the issued shares of the particular class and a special resolution sanctioning the variation is required under s630(4). The current articles do not provide for any differentiation from the model articles in relation to this area. Is a separate class consent in addition to the written resolution still required in this situation given the fact that all shareholders have signed and authorised (by written resolution) the variation of the rights attached to their shares by agreeing to the adoption of the new articles?
When there is a court convened meeting of a company, i.e. the court has ordered a shareholder meeting of a company, is there any obligation for the company to be represented at the meeting (by a director/by the board) or can the shareholder(s) simply meet?
In this scenario our client is the company. A shareholder of the company is retiring. It is agreed that the company will buy back the shareholder's shares (for cancellation). Under the payment schedule, there will be an instalment upon execution of the buyback agreement (off-market purchase agreement), a further instalment 6 months later and the remainder will be treated as a loan from the shareholder to the company. The loan will be redeemable 4 years from date of execution of the 'loan agreement' (the loan agreement will have been executed on the same date as the buyback agreement). Can you advise on which is the most suitable/appropriate instrument to govern the loan arrangement? Does the fact this involves the company buying back its shares affect which instrument I should use, or is the only consideration whether the company has 'distributable profits' from which to pay back the loan? I am inclined to draft a loan note but would appreciate a second opinion.
In a company incorporated under the 2006 Act with two classes of shares, where only one class is in issue, the directors are generally authorised under the Articles of Association in terms of s551(1) of the 2006 Act to allot shares and a further issue of both types of shares is proposed:- a) is it necessary to disapply statutory pre-emption rights prior to completing the further issue of shares? b) if so, is the correct way to disapply statutory pre-emption rights by way of a special resolution under s570 of the 2006 Act ?
In a situation where A and B jointly hold shares in a company, and then A sells his interest in the shares to B so that B is the sole owner of the shares: Does such a transfer need to be done on a stock transfer form; Are there any other specific filing requirements?
Can Companies House accept a late filing of the return of the purchase of its own shares rather than compelling a company to "unwind" the transaction and redo it lawfully along with all of its accounts?
Please could you let me have your views on whether a company may reclassify shares of one class held in treasury as another class of shares to be held in treasury and then sold? If possible, and assuming no restrictions exist in the articles, would this necessitate a shareholder resolution to effect? The Companies Act seems to envisage holding, disposing or cancelling, but not whether reclassification could occur?
As part of a tax driven scheme, the accountants have requested that the ordinary shares be "exchanged" for A Shares and B Shares in the company, the B Shares carrying weighted voted rights. There is only one class of shares at present. The company is a private company. The ordinary shareholders have consented in writing to the variation of the rights on their ordinary shares through the creation of the new classes of shares. Please can you suggest an appropriate mechanism? I am proposing to buy back the ordinary shares and to finance that buyback through the issue of the A Shares and B Shares to the existing shareholders. I understand that the share issue and allotment must be made before the buyback can take place. Can the subscription price for the new A and B Shares be left outstanding and set off against the redemption price for the ordinary shares? Ideally the shareholders should not be required to pay any financial consideration.
Do you have an example resolution, which can be used by a company which was incorporated under the Companies Act 1985 and has specific objects, but now wants to amend its objects so that they are of a more general or unrestricted nature?
Under section 47, the Company may (by a document executed as a deed) empower a person (either generally or in respect to specified matters) as its attorney to execute deeds or other documents on its behalf. What documents are required to empower a person to execute deeds as an attorney for a company?
Do you provide any guidance on the steps required to perfect/correct a void buyback of a company's own shares? The company in question was incorporated under the 1948 CA and its articles do not authorise a buyback. The buyback was purportedly completed 15 years ago and bought back the shares from the estate of a deceased shareholder.
I am amending the Articles of Association of a company incorporated under the 1985 Act. At present, the company has a variation on the Table A Articles. I am amending the Articles to a variation of the new Model Articles. The company has only one class of share (currently only 1 £1 share issued). Will a Companies House Form SH10 need to be lodged with the new Articles because the rights attached to shares are changing (s.637 CA 2006)? I know that a Form CC04 must be lodged because the Articles will give the company unrestricted objects (at the moment the objects are limited by the Memorandum of Association).
Regarding a buyback of shares by a private company out of distributable profits: It has been suggested that in order to ease cashflow pressure on the Company, that the seller of the shares should lend back to the Company the money he receives on completion of the buyback and this is then to be repaid by the Company over a 3 year period. The effect would in our opinion be the same as the Company paying in instalments for the shares, contrary to s. 691(2) CA 06. Do you have any experience of or comment on this practice?
I am preparing Board Minutes for a private non-traded company and am not sure if I need to hold a Meeting of the Board of Directors or a general meeting to approve the Auditors' Report and Accounts, and approve the re-appointment of auditors?
A stock transfer form requires that you fill in the amount of consideration for the shares and where several classes of shares are being transferred at the same time, a stock transfer form for each class of shares should ideally be used. How should this be dealt with where total consideration for the different classes of shares has not been spilt out/allocated amongst the class of shares but is rather one sum for all the shares? Is it acceptable for each consideration box of each form to state that the class of shares is in exchange for part of the overall consideration for the transfers?
Do "clear days" include or exclude weekends and public holidays? I have looked at section 360 of the Companies Act 2006 which defines "clear days" and it simply mentions that the period of notice excludes the day of the meeting and the day of the notice.
A bit of an obscure question and one that actually relates to Companies Limited by Guarantee (but could apply to one with Shares). Often CLG's have Rules that sit outside the Articles. These are not a public document and are not filed at Companies House. Often they govern Committees and other ancillary aspects of membership not central to the Company's constitution. What happens if certain things are contained in the Rules that should be in the Articles, e.g. voting rights or how votes are calculated? Does this mean that the Rules become the Articles and they just haven't been filed when they should have been or the Rules are still a contractual right as Articles are, but arguably the Articles carry some kind of membership rights? Additionally, there is nothing really in the Companies Act that sets out that certain matters (such as voting) must be in the Articles, e.g. s284 on voting provides that voting is subject to any provisions contained in a company's articles; if the Articles say that this is set out in the Rules,what are the consequences?
The unincorporated association is governed by a constitution, which it is seeking to amend. The constitution permits this to be done by way of a special general meeting, but there are no provisions to determine the period of notice that must be provided for a special general meeting (the notice period for an AGM is one month). In the absence of any specific provisions in the constitution, is there a legal provision that implies a notice period for a special general meeting (e.g the Companies Act 2006 s307 provides a notice period of 14 days for the general meetings of a company)?
The PLC standard document (Articles for a private company limited by guarantee) makes (inter alia) the assumption that the Company was formed under the 2006 Act and not earlier Companies Acts. If the Company was formed under an earlier Companies Act (in this case, 1948) and it now wishes to adopt the PLC standard document (with some minor changes) would this document be appropriate and if not, why not? Or would the new articles need to duplicate those provisions in the 2006 Act, which deal with a number of matters previously covered by the Articles? My understanding is that these are implied into a Company's capacity by the 2006 Act, whenever the company was initially registered, so this should not be necessary.
I am currently working on a residential matter where my clients are purchasing a leasehold flat. They (all three of them) have signed a power of attorney allowing their father to execute documents on their behalf. Am I correct in saying that if their father executes the contract this should be sufficient, as long as certified copies of the powers are provided to the other side? There is no need to have one power of attorney naming all three clients; individual powers are sufficient?
I refer to the paragraph headed 'Effect of Waiver' in the waiver of dividend practice note. The last sentence of this paragraph suggests that in the event of a dividend waiver by a shareholder or shareholders where such an amount can be divided between the remaining non waiving shareholders so that the overall amount per share increases as a result of the waiver(s), the amount of distributable reserves of a company needs to be the inflated amount to cover this, even though the amount being distributed is not changing and therefore, is still lawful. Is this the intention?
I am doing some research into the best way to acquire shares in a limited company - by purchasing the shares from an individual, or by acquiring newly issued shares in the company? What are the benefits or disadvantages, and what type of agreements would accomplish each of the scenarios?
Do you have any specific materials dealing with the mechanics of structuring private company sales via mergers (e.g. newco purchase of 2 companies/share for share exchanges) to include tax implications and clearances required?
What are the most appropriate mechanics/provisions for converting a number of shares of a specific class into a larger number of shares of exactly the same class, in a certain event? For example, 10 A ordinary shares to become 100 A ordinary shares in the event of a possible takeover. The only other class is B ordinary shares.
Company A owns 20% of the shares in Company B. 5 other shareholders own the remaining 80% of the shares in Company B. Company A is currently owned 100% by a single individual shareholder. By a share for share exchange, Company A acquires the rest of the shares from the other 5 sharehoders in Company B in exchange for shares in Company A. The shareholding of the 5 shareholders in Company A will mirror their shareholding in Company B. The individual shareholder in Company A who previously owned 100% will now own 20% of the shares in Company A following the share for share exchange. In the absence of any stamp duty relief under section 77 FA 1986 (as our understanding based on the wording in the legislation and in the HMRC Stamp Taxes Manual is that Company A needs to acquire the whole of the issued share capital of Company B to qualify for the relief), are there any other stamp duty reliefs available on the share for share exchange? Is there any better way of dealing with this to enable the share for share exchange to qualify for stamp duty relief under section 77 FA 1986? Assuming there are no other stamp duty reliefs available, on what basis should the consideration calculated to enable stamp duty to be paid on the share for share exchange. Is it based on the market value of the shares in Company B being transferred or the market value of the shares in Company A issued in consideration for the share for share exchange?
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?
This is a question regarding non-cash payment for shares. Section 582 CA 2006 states that shares allotted by a company and any premium on them may be paid up in money or money's worth. Your practice note goes into some detail on the requirements for a public company to allot shares for-non cash consideration. Are there any similar requirements for private companies? E.g. any formalities, forms that need to be filed at companies house etc?
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?
Under the Model Articles and the Companies Act 2006, can a board meeting be held via email over a period of days? For example, the Chairman would convene a meeting with an email containing the subject matter using a directors' email group. He/she would invite the other directors to comment over a period of days and then vote by a certain day.
My client wishes to open a UK establishment and has asked for the definition of 'opened'. Although from a practical perspective I know that Companies House would not make a point of this matter, they are keen to follow the letter of the law. I have checked the primary source, Overseas Companies Regulations 2009, but it is silent on this point. My initial advice for the definition of 'opened' has been to include such matters as the entity employing representatives to represent the establishment, taking a lease on a building where the establishment will be based, etc. Your thoughts on this matter would be much appreciated.
I am concerned as to the validity of the following provision in a company's articles regarding notices to shareholders: 1.1 Each shareholder shall provide an email address for the purpose of receiving notices in writing from the Company. Notices sent to the email addresses of the shareholders by the Company so provided shall be deemed to have been served on all the shareholders whether or not each shareholder has provided an email address to the Company for this purpose. 1.2 The Company shall be under no obligation to serve notices on shareholders save by email. 1.3 Notwithstanding the provisions of this article, notices in writing served by the Company on a shareholder otherwise than by email shall be deemed to have been properly served. S. 308 and S 310 Cos Act 2006 would appear to allow such a provision. However para 6 of Schedule 5 to the Cos Act 2006 appears to require that a member consents to the use electronic forms of notice and that such consent can be revoked. In which case, has the member consented by the adoption of the articles containing the provision whether he voted or not at the meeting? Can such consent be revoked by notice to the company? Is the provision inherently invalid as no true consent can have been given merely by the adoption of articles with such a provision?
Please could you indicate whether it is possible to have ordinary shares which solely have rights to vote and not receive a return of capital upon liquidation. The rights attaching to the ordinary shares would be only voting rights and upon a voluntary or compulsory liquidation, such holders of ordinary shares would not be entitled to a return of capital.
In the context of a quoted public company, in which shareholders (and one of the directors who is also a shareholder) requisitioned a general meeting to remove two of the three directors, are there any provisions under the Listing Rules or the Companies Act 2006 or otherwise that would restrict the ability of the requisitioning shareholders to send members' statements to the other shareholders making representations about the directors proposed to be removed? The company has not been requested to circulate the members' statements.
I am trying to find an authority for the statement that a company's statutory registers, and in particular its register of members, must be kept at the same location. Am I correct in noting that a company can only have one single alternative inspection location?
What document do you use to make an application to the Companies Court (section 1029 CA 2006) to restore a company to the Register of Companies, e.g. Part 8 Claim Form or by way of an ordinary application?
Does a company have to reduce its share capital before strike off if its share capital is more than £4,000? It mentions this in your note but given the Bona Vacantia department has removed this threshold in terms of the assets it can pursue I was under the impression a reduction is no longer necessary. Do you have any further materials on this?
When preparing a statement of capital on completion of a share buyback out of profits: a) is the share premium account unaffected by the buyback, the full pre-buyback amount (representing all share premium ever paid, subject to any reductions) remaining on the account to be divided amongst the remaining shares for the purposes of the statement; and b) do you include the amount now in the capital redemption reserve when calculating 'the amount paid up on each share' which includes 'both the nominal value and any share premium'? In the case of the buyback and cancellation of an entire share class, being the only class on which any premium was ever paid, does that premium remain to be divided amongst the remaining shares in issue, despite the fact that no premium was paid upon those?
Section 291 of the Companies Act 2006 states that circulation of a written resolution proposed by the directors can be sent in hard copy form, electronic form or by means of a website. The company in question is incorporated under the Companies Act 1985 and has adopted Table A (version Companies (Tables A To F) Regulations 1985 as amended by SI 2007/2541 and SI 2007/2826) with various amendments. The notice provisions at Regulation 111 onwards of Table A are unaltered by the Articles. Regulation 112 states "the company may give any notice to a member either personally or by sending it by post in a prepaid envelope addressed to the member at his registered address or by leaving it at that address or by giving it using electronic communications to an address for the time being notified to the company by the member". I am not clear on whether a written resolution is "a notice" for the purposes of the Articles and so whether these provisions need to be complied with? Also under Regulation 115, a notice is deemed to be given 48 hours after posting and I am wondering if this time period also needs to be factored in in calculating the lapse date?
I am carrying out research surrounding amending articles and memorandums of association (already registered) for companies limited by guarantee. I have entered various search terms with numerous results. Could you possibly provide me with some guidance as to where I can find the information I am researching?
A private company has called a general meeting (having been requested by the shareholders holding more than 10% of the issued share capital). Notices have been sent to the shareholders stating the venue at which the general meeting will be held. Can the venue of the meeting be changed one week in advance of the meeting date or does this effectively amount to a new notice which must adhere to the normal time limits prescribed by the Companies Act? If the venue can be changed what is the porcedure for informing the shareholders?
Can the consideration due in respect of a buy back by a private company of its own shares out of distributable profits be paid PRIOR to the passing of the special resolution authorising the buy back? If not what is the effect of a purported buy back in such circumstances?
If a limited company is buying back shares from shareholders are you aware of anything that might prevent it from buying back shares from Shareholder A at a very different price from that which it is paying Shareholder B, where both shareholders are aware of the different share prices being paid?
Please see section 779 Companies 2006(issuing share warrant to bearer). Reviewing your materials I cannot locate a specimen form of private company share warrant to bearer whereby exisitng shareholders issue a warrant to a third party which may, by a specified date, call on those shareholders to deliver a fixed number of shares. I anticipate the articles of association will need to be modified to permit such share warrants being issued by the company. Your views would be appreciated.
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.
My question is concerned with the Reserved Matters that can not be resolved without the Investor’s or Investor Director’s consent. As far as I understand in your standard Investment Agreement the contractual mechanism is proposed under which prior to taking a certain action the Company shall obtain a consent from the Investor or Investor director (as the case may be). The mechanism resembles negative covenants in loan agreements under which a borrower may not take certain actions without a lender’s consent. I would like to understand how this mechanism works. My understanding is that before any voting at a general meeting or the board the consent shall be obtained. Unless it is obtained the relevant reserved matter shall not be proposed or if proposed the shareholders (directors) shall vote against it or shall abstain from voting. Even if the matter is adopted the Company may not take any actions in accordance with the resolution that was adopted in breach of the SHA. Is it right? And the other question is about the remedies. As far as I understand the remedies are contractual and will be the damages and/or injunction. So the resolution adopting reserved matter that made in accordance with the Articles but in breach of the SHA will not be void or voidable. Is it right? In the drafting note you say that “Rather than obtaining the consent of the investor and/or investor director, an alternative approach is to require shareholders' approval for certain matters
A company has two share classes, ordinary and preference. They wish to cancel the preference shares and only have one class of ordinary shares. I have checked the articles and they are silent re. cancellation or reclassification of existing shares. Is this possible?
I have a client that is a private company that wishes to offer its shares to its existing employees for staff incentisation/buy in reasons and to assist with its capital postion (the company, or at least its main operating subsidiary, is regulated by the FSA). Assuming that the offer is to employees only and to less than 150 people then my assumption is that this offer is not covered by the Prospectus Directive or any such regulations. In short, all I need to be concerned with from a statutory point of view is the normal Companies Act principles around share subscription/allotment covered by the PLC "Allotment and Issue of shares" Practice Note. Subject to that this can in effect be treated as a private transaction between the company and each subscribing employee. Is that correct? Also, do you have any standard form documents that may be used for this purpose, specifically to describe the initial offer proposal to the company's employees and any applicable subcription agreement for use between the company and each employee.
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 or does the director's right to attend require an actual meeting to be held? The company's articles incorporate article 37 of the standard articles which I assume allows this to be held "virtually".
Should a guarantee granted by a Target company in respect of the obligations of the Buyer to a lender funding an acquisition be classed as a distribution (and therefore be capable of being an unlawful distribution) for the purposes of Part 23 Chapter 1 of the Companies Act 2006 given that payment under the guarantee is going to the lender rather than the members?
I am reviewing a number of historic share buybacks from capital. The company has 2 directors who are also the two 50% shareholders. Each buyback is for an equal number of shares of equal value for each shareholder. In general the correct procedures have been followed to complete the buybacks, however the shareholder resolution to approve the buybacks are single written resolutions authorising the repurchase of both shareholders shares signed by both shareholders. The Companies Act (s.717) provides that a shareholder is not an 'eligible member' for the purpose of voting on any resolution authorising the repurchase of their own shares. To be strictly compliant 2 separate resolutions should have been completed and authorised by the shareholder to whom the resolution did not relate. My question is whether the written resolution procedure used invalidates the buyback in its entirety?
I've read the note on share buybacks for private companies and I just wanted to be clear on the position as regards using borrowings to fund a share buyback. Am I right in thinking that it is not currently clear whether or not it is permissible to use borrowings to fund a share buyback? If you were to proceed on the basis of borrowings funding a buyback what would be the best PLC materials/process to use - those for buyback out of capital or those for buyback out of distributable reserves?
We have a client who wants to issue bonus shares out of his company's capital redemption reserve. He would like to know: (i) can the company buy these back at a later date; and (ii) if so, what are the consequences of continually issuing bonus shares with the company nuying them back to create a new capital redemption reserve? Your thoughts would be much appredciated.
I have a query in relation to share transfers. When a share is tranferred (either by way of certificate or uncertificated) does the transferee (the individual receiving the shares) have to consent to the transfer? The share transfer form does not require the transferee's permission and I realise that shares can be transferred in certain cases (i.e. the death of a shareholder and it passing automatically to their personal representatives), however it is not explicitly clear whether the transferee has to consent.
I'm dealing with a 'Not for Profit Company' Limited by Guarantee. One of the members wants to leave the Company and I need to advise on how their exit should be dealt with. Please could you point me in the direction of an appropriate practice notice I could use? Many thanks
Can a written resolution be passed by the members when it has been circulated by a 30% shareholder directly and passed with the requisite majority, even though the Act only envisages that written resolutions are circulated by the board under section 291 or 292 CA06? Thanks.
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".
We have a siutation where a creditor sent a proxy to vote in favour of a CVA at the creditors' meeting. The proxy however did not have authority to vote in respect of any modifications proposed to the meeting by other creditors only to vote in favour of the original CVA as proposed. Modifications were proposed at the meeting and these were passed by the majority creditor vote. How should the chairman have treated the proxy? Are they a vote in favour, a vote against or an abstentation (i.e. no vote)? My initial thinking would be that they are a no vote because they do not have authority to vote on the modified proposal and so effectively this is the same as the creditor/proxy not being present.
Can a member of a private company limited by guarantee transfer part of his membership in that company to another person? I note Article 21 of the PLC articles of association for a private company limited by guarantee (non charitable) and assume that consequential drafting amendments would permit a transfer in part. Do you have a precedent form of transfer form by which a guarantor member transfers his membership to a third party?
Is there a danger when drafting that by making direct reference to a Shareholder Agreement in the Articles of Association that the Shareholders Agreement could be deemed to be "incorporated" into the Articles of Association?
We are required to place a notice in "an appropriate national newspaper" to advertise the buy back out of capital. I note that section 719(3) states that an appropriate national newsaper is a paper circulated "throughout the part of the United Kingdom in which the company is registered". Does that mean it has to be a newspaper circulated in England & Wales or in, for example, Hampshire?
I am reviewing a number of historic share buybacks from capital. The company has 2 directors who are also the two 50% shareholders. Each buyback is for an equal number of shares of equal value for each shareholder. In general the correct procedures have been followed to complete the buybacks, however the shareholder resolution to approve the buybacks are single written resolutions authorising the repurchase of both shareholders shares signed by both shareholders. The Companies Act (s.717) provides that a shareholder is not an 'eligible member' for the purpose of voting on any resolution authorising the repurchase of their own shares. To be strictly compliant 2 separate resolutions should have been completed and authorised by the shareholder to whom the resolution did not relate. My question is whether the written resolution procedure used invalidates the buyback in its entirety?
A client is soon to enter into a Contract with a Company that is stating that it wishes to enter into the Contract by using its trading name and not its actual name. Further, the trading name that it is wanting to use, is the same as a different registered Company. If the Company enters into the Contract with my client and my client attempts to enforce the contract, will the contract be invalidated because it has been entered into by the trading name and not the registered name?
If there is a company (limited by shares and incorporated 2008) that passed a special resolution to amend its articles and filed the resolution but not the articles at Companies House are the new articles binding now? I am aware that the late filing is a criminal offence and that the situation could be rectified but what we need to know is the position between the time when the resolution was passed and any rectification made. As s26 does not state that the new articles will be voided then I believe that the new articles will be in force but that the officers will be committing a criminal offence. However, I cannot find any documentation on PLC to support this and was wondering if you would be able to assist or clarify the situation if the above is incorrect. I look forward to hearing from you.
If there are two directors appointed, is there any reason why the quorum for a directors' meeting cannot be set at one director, other than the fact that that director can carry decisions on his own? Is there any specific wording for this?
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 notice that the resolution to redesignate the shares as A ordinary shares is stated to be an ordinary resolution. However, in an answer to one of the "Ask PLC" questions you state that: "To effect the reclassification, you will require a set of board minutes, a special resolution to vary the rights attached to shares and to vary the articles setting out the rights, a new set of articles and possibly class consents under section 630." I also note that Tolley states: "If the articles of association of the company give the company the power to do so, an ordinary resolution of shareholders to convert shares from one class to another may be sufficient (a special resolution will be necessary if a change to the articles is needed to set out the new share rights, or if the articles of association of the company require a special resolution for the conversion procedure)." The Manual of the ICSA states: "Where existing issued shares are to be converted to shares of another class, this should be effected, out of caution, by special resolution". I would be grateful if you could clarify whether, in your opinion, the redesignation/ reclassification of shares requires an ordinary or a special resolution, or whether it depends on the circumstances.
Members of a company have the right to appoint a proxy of their own choice, however can a company restrict the choice of proxy ie employee of the member's company so that a stranger is not appointed as a proxy?
I am wondering why PLC opted to exclude model articles for public company. We are a unlisted public company which was incorporated about 20 years ago under the 1985 Act. I am considering adopting the model article for public company to start with. Please let me know where I can find it on the PLC site.
If the articles of association of a company provide that all business shall be deemed special that is transacted at an Exraordinary General Meeting, should such business, in the absence of any express provision to the contrary, be passed by way of a special resolution?
Have you ever come across whether regular monthly payments made by a company to its shareholders are each an interim dividend or actually payments loaned to the shareholders on account of a year end dividend? There is absolutely no paperwork. This is a common scenario for small companies with a couple of shareholders who work in the business, but the technical distinction is significant as it will mean whether the Company (which was recently acquired by a third party) may be able to take action against an ex-shareholder to recover the sums paid out during that part-year on the basis that they were a loan repayable by the ex-shareholder to the Company on demand (but perhaps not if they were valid interim dividends. Any thoughts would be grateful received.
I have asked this before but am still unable to find a precedent for a private company shareholders agreement where there are a number of shareholders and which contains a reasonably comprehensive set of provisions dealing with share transfers, both voluntary, involuntary, drag along, tag along etc and with good leaver/ bad leaver definitions. Am I missing something and can someone point me to a suitable precedent? The only ones here seem to be a very short form one which is not helpful and one for a joint venture which is not appropriate. If one does not exist, would this not be a useful precedent to have?
We are undertaking a tidying up of our group company structure, as part of which we are proposing to apply for voluntary strike off and dissolution of a number of dormant subsidiary companies under section 1003 of the Companies Act 2006. Some of the companies we propose to strike off have significant called up share capital, with some of these also having a deficit on their profit and loss account on the bottom half of their balance sheet. Example: Company A Called up share capital: £3,000,000 Profit and loss account: (£2,405,000) Shareholders funds: £595,000 The shareholders funds are represented on the top half of the balance sheet of Company A by a debt in the sum of £595,000 owed to Company A by another group company. It is not certain as yet how the asset in the above example will be dealt with. The debt in question may be written off by Company A prior to dissolution. Do we need to make a share capital reduction in respect of Company A’s share capital before it is dissolved to avoid any rights (including to recover amounts paid by way of unlawful capital distribution) passing to the Crown and to protect Company A’s shareholder/directors? Or is this only necessary where there is any distribution of Company A’s assets (here, the intra-group debt) prior to dissolution, and if so, would a waiver of the debt constitute a distribution for these purposes?
We are acting for the shareholders of a private limited company who have agreed to transfer their shares in a Target Company to a Newco Company. In consideration for the transfer of their shares in the Target Company, the Newco Company shall issue and allot consideration shares in the Newco Company to the shareholders in the same proportions in which the shareholders curently hold shares in the Target Company. Accordingly, an application for relief from Stamp Duty shall be made under section 77 of the Finance Act. In the meantime, the newly formed Group shall enter into new banking facilities with Bank Plc and as security, Bank Plc requires (amongst other security documents) a charge over Newco Company's shareholding in the Target Company. Are the directors of the Target Company able to register the transfer of shares, and therefore write up the register of members in the statutory books of the Target Compnay (so as to evidence Newco Company as the legal owner of the shares) prior to the stock transfer forms being stamped?
I have noticed that your precedent shareholders agreement and articles both reflect an approach whereby matters such as shareholder pre-emption rights and tag/drag rights appear in the shareholders agreement but not the articles. I have always worked on the understanding that such matters are best placed in the articles. Can you explain whether best practice has changed recently, and generally what are the key considerations to take into account when deciding which document to put these provisions into? See eg Shareholders' agreement short form (which has p-e rights on transfer) and Articles of association for a private company limited by shares with several shareholders (which does not).
The articles of association for my client's company state that a defined term has the same meaning as set out in a shareholders' agreement. The client wants to amend the definition in the shareholders' agreement. Does this amount to an alteration of the articles of association of the Company? The shareholders' agreement has not been registered at Companies House.
This query relates to a private company buying back its shares on the basis of multiple completions. A few of the Ask PLC questions have raised questions on this topic but all appear to relate to the company buying back the shares from distributable reserves and raising the point as to whether the directors need to re-assess the position each time a completion occurs. In my scenario, it is clear that each completion will need to be paid for out of capital (as it is very unlikley that sufficient reserves will be available). I cannot see any reaon why that cannot be done although, inevitably, there will have to be a series of shareholder resolutions approving each completion out of capital (due to the timing requirements for payment out of capital after the resolution is passed). Do you see any problem with having a single contract providing for multiple completions and (as is likley to be the case) each completion being funded from capital (subject to each requisite resolution being passed)? I look forward to hearing from you.
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.
Please explain with relevant case law whether there are any further cases (other than BDG Roof-Bond v Douglas and others  1 BCLC 401) which have examined non-cash consideration being used for the repurchase of shares. It would be helpful to know if there is any cases on the above point which are based on the Companies Act 1948. As a side issue, I note from www.practicallaw.com/3-422-4962 that the editor of the article indicates that there is concern over the approach adopted by Park J in BDG Roof-Bond. Please elaborate on this as well. In particular, is it possible for non-cash consideration in the form of an assignment of a debt obligation to be used to repurchase shares?
I'm working on a contract. The definition for "Group company" is as follows: “Group Company” means any direct or indirect subsidiary or any direct or indirect holding company or any such subsidiary of any such holding company or any such holding company of such subsidiary, “subsidiary” and “holding company” having the meanings defined in Section 736 of the Companies Act 1985 as amended by the Companies Act 1989. I think this legislative reference is dated and superseded. Can you tell me what it should reference with the section?
Under the Companies Act 1985 section 83 no allotment of shares could be made by a PLC unless the minimum subscription was received within 40 days of the first issue of the prospectus, otherwise the money would need to be repaid. That section has now been repealed and doesn’t appear in the CA 2006 but we need to check whether there is still this limit contained in some other legislation, for example possible the listing/prospectus rules. We've looked but haven't found anything. Would you be able to check this please?
When a company re-registers from public to private, is the notice to shareholders (informing them that the company is changing from public to private) made public or is it kept confidential, please? Also, should the notice be sent before of after the public announcement of the deal? Many thanks.
Can a company secretary be liable for filing something at Companies House which they know to be invalid e.g. filing a director's resignation with the knowledge that the correct procedure to remove the director had not been followed?
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?
Can a board resolution be passed by email (with no actual signature) instead of by written resolution? (1) section 248(1) CA 2006 states that minutes are required. (2) sections 1134 and 1135 CA 2006 state that the company records include minutes and that the company records can be held in electronic form, but must be capable of being reproduced in hard copy, if requested. (3) Electronic Communications Act 2000 states that e-signatures are legally admissible in the UK.
We have had an enquiry from a freehold management company that was incorporated prior to the completion of the freehold purchase, with a share capital of 20 x 1 ordinary shares. All shares were allocated to the flat owners at incorporation, however following incorporation but prior to completion of the freehold purchase, one flat owner decided not to participate. Is the company required to 'buy back' this flat owner's share pursuant to Part 18 of the Companies Act? The filing of Companies House form SH03 is applicable but are all of the other elements to Part 18 needed as there is no payment of premium involved? Neither the procedures for buy back out of capital or buy back out of distributable profits seem to apply.
A company has an "A" Share class. The parties wish to ensure that 2 (not all) of the class A shareholders have a "non-dilutable" holding. By this they mean that on the issue of new class A shares the percentage holding of those 2 shareholders is not diluted but they do not want a standard pre emption provision which would require them to subscribe for and pay consideration for a relevant proportion of any new A share issue. How, if at all, could this be achieved?
We have a situation where the sole member of a company limited by guarantee wants to withdraw as a member (as permitted by the articles), following a dispute between him (also a director) and the other directors. Membership is not transferrable under the articles. What are the implications of a sole member withdrawing and the company being left with no members? Is this lawful?
We may want to buy a company limited by guarantee with no shares. How do we go about doing it? What do we need to be wary of? Does PLC have any document which may assist - we have looked but cannot find.
Can a private company with a single class of share which is proposing to allot shares of that same class rely on section 550 Companies Act 2006 regardless of whether there is an authority to allot shares in its articles(see reference to "any power of the company")?
I have been reading your practice note, General meetings (including AGMs): preparation and notice, in relation to how members can request the directors to call a meeting. I am currently acting for a client who is a shareholder and would like to propose a resolution at that meeting. However, if there is a scheduled AGM in 2 months would it possible for the members to propose that the resolution is passed at this meeting instead of having to call a further general meeting? The company has Table A articles.
If a shareholder votes by proxy at a general meeting and decides to change vote prior to deadline for proxies to be received, is it possible for the shareholder to send in a second proxy to the company which will be treated as his vote and will cancel the previous proxy form?
Is there any guidance or case-law as to what constitutes an "official publication" in relation to the disclosure of a company's registered name? Would own-brand products (e.g, guidance manuals, template contracts and forms etc)sold to customers to assist them in their work be included within this definition?
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?
In relation to a convertible loan note instrument for use in venture capital transactions: (a) if a private company which currently has just one class of shares in issue wishes to issue convertible loan notes pursuant to such an instrument, will it be required to obtain authority to grant rights to convert such notes into shares in the company pursuant to section 551 of the Companies Act 2006 as pursuant to the terms of such an instrument the notes (usually) have the potential to convert into either the same class or a new class of shares?; and (b) if the conversion formula is such that it is not possible to ascertain at the time the section 551 authority is obtained the actual maximum number of shares that could be issued on conversion, is it sufficient for the purposes of section 551 (3) (a) for the directors to be given authority to grant rights to convert the loan notes into shares in the company up to the maximum amount of shares that are capable of being issued pursuant to the terms of the convertible loan note instrument? Or is a specific number always required?
Where a limited company enters into a contract using the format "X Ltd trading as Y", does this create any difficulties in enforcement of the contract if X Ltd subsequently changes its trading name to "Z"? Would it be more prudent simply to contract as "X Ltd" without specifying any trading name?
A shareholder would like a shareholders' agreement provision to provide that on his death or terminal illness (as certified by a medical practitioner) his shares will automatically transfer to one of the other shareholders for no consideration. Is this permissible?
I have two questions please: A company has been established with Class A and Class B Shares. Class B Shares are non-voting and not transferable (other than in very limited circumstances). The Company would like to provide the following pre emption rights on class A transfers - if a Class A shareholder wishes to transfer shares (the "Transfer Shares"), the shares must first be offered to the Company Founders (2 named individuals). If the founders do not buy any or all of the Transfer Shares then they must then be offered to the other Class A Shareholders. Is there any issue with putting this 2 step pre-emption requirement and the other restrictions in the articles? My thought was that to achieve this in the articles they should actually hold a distinct class of "founder" shares as the provision gives 2 shareholders within a class greater rights than the other shareholders in that class. Alternatively, could it be included in a shareholder agreement so that there is no need to create a new founder share class? They also wish to include transfer restrictions on death that apply to all class A shareholders other than the Company Founders. The same issue as above applies but in addition is it possible to provide that on death the personal representative must offer the shares to other shareholders of that class and then only if they decline to buy the shares can the PR transfer the shares to whoever has inherited them? Many thanks
My query relates to the definition of trading for the purposes of voluntary strike off for a company. If a company ("A") is not trading in goods and not active generally, but is, under a foreign agreement entitled to receive royalties for products sold by the company with which the agreement is entered into ("B"), do the royalties make the company 'trading' for the purposes of qualifying for voluntary striking off? Does the answer differ even where they are not receiving the royalties as B has stopped selling? i.e. where they only have the rights to the royalites, but in reality receiving none? Can a company still deem themselves 'not trading' for the purposes of voluntary strike off even if they are technically entitled to royalities under a foreign jurisdiction?
Is there anything in the law to prohibit a company to issue preference shares with the following rights as regards dividends: - for a right to a dividend to be declared equal to the funds that the holder of the preference shares paid to acquire the shares initially (nominal value and premium) - once these funds have been paid through a dividend, for the preference shares thereafter to have a right to receive a fixed amount as a dividend on an annual basis (provided there are available profits for distribution). If it is possible to stipulate that a fixed amount (as opposed to a rate of return) shall be distributed as a dividend as regards preference shares, are there any restrictions and/or considerations which should be adhered to as regards the magnitude of this fixed amount? - for this right (i.e. to a fixed amount to be declared as dividend on an annual basis) to be effective without any time limitation (i.e. each year), unless the articles which provide for the preference shares are amended. Thanking you in advance for your assistance.
I have a client forming a new company with a group of investors taking shares. They will want a full shareholder agreement, but before then require a preliminary document as a sort of 'memorandum of understanding' that sets out how much they are investing and what shares they are getting in. Do you have a suitable document and notes for this?
Do the provisions of a section 793 notice apply to nominee companies in other jurisdictions (i.e. other than UK, EU)? Does the client (i.e. the person on whose behalf the nominee company holds the shares) need to be informed of the event (i.e. the section 793 notice)?
My question is regarding articles. It is common to see provisions stating that if a member becomes a Leaver (i.e. ceases to be an employee or consultant) and is required under the compulsory transfer provisions to transfer their shares but refuses to sign the stock transfer form, the directors may appoint some other person (including one of their number) to sign such forms for that member. The Articles I have in mind also provide that where a Leaver retains shares, they are deemed to vote the same way as the majority of the holders of shares of that class at a meeting or on a written resolution. Sometimes these types of articles say the directors are acting as the Leaver's "agent and attorney" in relation to some matters, sometimes they don't say at all - just say it can be done. My query is this - what is the nature of the power they are acting under? Is it valid to just give the director/s such a power in the articles? Are they acting under a genuine power of attorney - it would seem not as there is nothing in writing signed by the member appointing them under a power of attorney? Any thoughts appreciated!
I am acting for a company and their articles of association are a variation on Table A under the Companies Act 1948. The company now wants to adopt more modern articles. Are they able to approve this by written resolution or will there need to be a general meeting?
A client company has a shareholder agreement in place between all its existing shareholders. It is now issuing non-voting shares and does not propose getting the new shareholders to sign a deed of adherence to the existing shareholder agreement. Given that the new shareholders are non-voting would this approach pose any risks?
Under section 695(3), a resolution approving a buyback is not effective if: A member holding shares to which the resolution relates exercises the voting rights carried by those shares (whether on a poll or on a vote by a show of hands; and The resolution would not have passed if those votes had not been exercised. How will this be affected by and how does one get round the situation, where all shareholders are having a % of their shares purchased by the company? Do they vote with their shares which are not being bought?
At some point in the past, I believe one only needed to list shareholders in annual return every 4 years. I do not find this requirement any more in the annual return form. Do we have to list all shareholders in annual return every year now?
We have received a notice under section 447(3) of the Companies Act 1985 of the appointment of investigators to undertake enquiries in relation to our former clients. We are required to produce documents and information to the investigators. We believe that this statutory requirement will override our duty of client confidentiality, but please could you confirm?
I am having difficulties finding any authorities on how shareholders of a parent company can excert control over a wholly owned subsidiary. I know that shareholders in a company can require the directors of that company to circulate a written resolution under s.292 CA 2006. I need to know whether the members of a parent company can require the directors of a wholly owned subsidiary to circulate a written resolution in respect of the subsidiary or whether the shareholders of the parent can require circulation (by the directors of the parent) of a resolution which would attempt to bind the subsidiary. Any assistance would be greatly appreciated.
Can a member of a company limited by guarantee that has donated monies to the company be repaid those monies? I note that for companies that wish to be charities, the Charities Commission requires the articles to prohibit the distribution of income and profits to members. 1. What if a company limited by guarantee has not yet registered as a charity? 2. Do monies donated count as income?
If a director is not required to make a declaration of interest in a proposed transaction because the other directors are already aware of his interest pursuant to section 177(6)(b) Companies Act 2006, please could you clarify whether the director will still need to comply with Model Article 14 in order to be counted as participating in the decision-making process for quorum and voting purposes i.e. by falling within one of the exceptions in Model Article 14.3? If the director is not required to comply with Model Article 14 in these circumstances, would it be correct to state in the board minutes that the director confirmed that he had no interest in the proposed transaction which he was required by section 177 of the Companies Act 2006 and the Model Articles to disclose or would there need to be a further reference to the director's ability to vote under the company's articles (as per the PLC skeleton form of board minutes)?
I wonder if you could help me with a query concerning section 756 of the Companies Act 2006. The query relates to a scenario where a private company is proposing to offer shares to (i) all its members (numbering over 1000), (ii) a defined list of "supporters" of the company's business who are not members (number not known, but could be several thousand), and (iii) certain high net worth individuals. I am trying to work out whether this would be an "offer to the public". My specific queries are as follows: Section 756(3)(a) - if the offer goes to a list of particular persons (identified by name and address) rather than being directed to the public generally, does it matter that this may be a very long list indeed. Is there a risk that, if the list is sufficiently long, it could be deemed to be an offer to a "section of the public"? There appears to be a complete dearth of authority on this point. Section 756(4) - does this provide an exhaustive definition of what is a "private concern" for the purposes of section 756(3)(b), or merely one example of a "private concern". I consider it to be the latter (and the explanatory notes to the Act appear to back up my view), but I should be grateful for your views on this. Furthermore, if it is the latter, what exactly does "private concern" mean. If an offer is made to a defined list of individuals who already have an association with the company (albeit not as members) and that offer is non-transferable, is this enough for
You state that for companies incorporated before 1 October 2007, the default model articles continued to be Table A from the 1984 Act. I have a Company that was incorporated under the 1948 Act and it adopts Table A from the 1948 Act as its model articles. Is it not, therefore, the 1948 Act Table A that I should refer to rather than the 1984 Act Table A?
Upon the death of either party to a share swap agreement where there is an obligation on the parties to the contract at a future fixed date of sale to (a) pay the party whose shares have increased and (b) to exercise their right to receive the increase, do these rights and obligations automatically pass onto the Personal Representatives of the deceased's party's estate and are they then enforceable against the other party? If not, is a specific clause in the contract required and which type of clause?
I am trying to find out if a “person authorised” under ss 270 and 274 of the Companies Act 2006 includes the solicitor acting for the company. I would like to sign the change of name form to be lodged with the company on my client’s behalf, and do not want to send this to the client to do so and incur further delay.
I am looking at the removal, by a 1985 Act incorporated company, of the deemed restriction on authorised share capital pursuant to para 2 of Sch 2 of the Companies Act 2006 (Commencement No 8, Transitional Provisions and Savings) Order 2008. I have a situation where there is no specific shareholder resolution (ordinary or special) confirming that the share capital of the company is now unlimited but what I do have is a special resolution of the shareholders confirming that the paragraph in the memorandum of the company which previously set out the authorised share capital has now been deleted. Following the deletion of the paragraph specifying the amount of the authorised share capital is the company's share capital now unlimited?
A client of mine has formed his own company on line and mistakenly formed it as a company limited by guarantee. Can this be converted to a normal limited company with an issued share capital, and if so how? Or does he have to abandon it and start again?
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.
My client wishes to convert a number of 1 redeemable preference shares into a number of 1 ordinary shares. Each ordinary share is worth 41 (approximately). Accordingly 41 1 preference shares will convert into 1 1 ordinary share. In order to effect this, as I understand it, the company will need to redeem the preference shares and issue the ordinary shares in satisfaction of the amount payable on redemption. I believe this will cause a reduction in the share capital of 40 for every ordinary share issued in consideration for every 41 preference so does the company need to approve a reduction in its share capital simultaneously with the conversion. Is there a simpler way to effect the conversion?
I have a situation where an existing corporate shareholder is considering contributing a sum of money to one of its subsidiaries. While I am aware that it may do this by subscribing for shares in the subsidiary (in which case I understand the subscription monies will become part of the share capital of the subsidiary), are there other methods of doing this, for example by way of loan from the shareholder to its subsidiary or by making a gift to the subsidiary? If so, are there any corporate law issues, (in addition to the directors' duties of the corporate sharehlder) that should be considered in making a gift or loan?
On incorporation of a limited company one £1 nominal value ordinary share was issued. The client now wishes to issue further ordinary shares of £0.01 nominal value. Looking at section 542 of the Companies Act it appears that although it requires that all shares must have a nominal value there is nothing to stop a company having ordinary shares with differing nominal values (and that these wouldn't be different classes as nominal value would both be considered a share right). Do you agree and if this approach is taken should there be two separate line entries on the SH01 for £1 ordinary shares and £0.01 ordinary shares? (The alternative is of course to subdivide the existing share into 100 £0.01 shares).
Firstly I am not a corporate lawyer but I am reviewing articles in connection with a share plan. The company was incorporated under the 1985 Act, I am proposing to update its constitution with PLC standard private company articles with reference to the model articles. The company has 2 classes of ordinary shares. The drafting notes to the PLC articles say that there is an assumption that the company only has one class of shares. Article 22 of the Model Articles states that there is a power to issue different classes of shares, subject to the articles. Questions 1. Is there anything in the articles which will prevent the company from being able to either issue an additional type of shares or have the existing second type of shares in existance? 2. Do either the articles or the model articles require to be amended re the existing second class of shares?
I'm drafting a contract and the other party is an unincorporated association. The contract will be between the Council and the manager of the unincorporated association (on behalf of the unincorporated association). Do I need to put the personal address of the Manager or will his name and the address of the association suffice please?
Does a shareholder of a private limited company have a right to a dividend payment? What is the contractual or legislative breach if the company has failed to pay a dividend notwithstanding a 22.5% share of the company?
Do you have a short form set articles of association for a private company under the 2006 Act which: 1. incorporate the Model Articles by reference to the Model Articles (i.e. keeps the document short); 2. are for 2 or more individual (rather than corporate) shareholders where one may have a majority of the issued shares; 3. include permitted transfers of shares to family members; 4. include pre-emption rights and forced offering of shares in the event of death, bankruptcy or termination of employment of a shareholder.
Is it possible for an employee shareholder to sell shares back to the company for cancellation for nil consideration? The company has no reserves and may not want to do it out of capital because of its financial position. The buyback would be under a call option from the company which it would exercise if the employee exercised an EMI option over another class of shares.
We currently have in issue 2 Ordinary shares. These 2 shares will be redesignated as 1 A Share and 1 C share. The intention is to then allot further A shares and also C shares. We also intend to create a new class of B shares. 1. Are we able to simply allot further A shares and C shares on the basis that these have now been created following the redesignation? 2. How do we create the new class of B shares? In the past we would have redesignated X number of the unissued shares as B shares. Under the 2006 Act do we simply pass a special resolution to create X number of B shares? Once these B shares have been created are we able to simply allot further B shares in the future at will? Obviously pursuant to the articles.
Can a company (incorporated prior to the Companies Act 2006) adopt new articles which refer to Table A rather than the Model Articles, even though the Model Articles have now been finalised and are available for general use by new companies?
I thought I had recently come across an item in PLC that detailed the key regulations a business should be aware of when setting up a new business. The document provided a brief summary of the regulation but was a quick guide to the key regulations. Is this a material in your package and if so can you point me to it, please as my searches are not locating it.
Is there any legal reason why a company needs to keep hard copies of board minutes or is it possible for the signed copy to be scanned into the computer as a pdf and kept electronically and the paper copy destroyed?
We are currently looking at a company reduction of share capital for a private company with 30+ shareholders many of whom have been allotted shares at different share premiums at different times. In looking at completing the form SHO3 we must state the remaining shareholdings and amounts paid including any premium. If one shareholder is giving up only part of their shareholding as part of the buyback and the overall shareholding has been obtained at several different premiums, is there an established method for allocating the remaining shares between the premiums in order to calculate the total sum paid on the remaining shareholdings? If there have been prior share transfers, it would seem to be impossible to track the share premiums payable on any specific share.
I was wondering if you would be able to direct me/tell me the 'certain circumstances' in which a shareholders' agreement and the background admissible to the construction of that agreement could be taken into account in construing articles of association? I have tried to pin point what these circumstances are, however I'm unclear as to what they entail.
I have increasingly come across companies with alphabet shares where further shares have been issued without a section 551 authority. The articles of association for these companies clearly state that the alphabet shares rank pari passu but will be classed as separate classes of shares and often there is a right to declare different dividends in respect of each class. My understanding of the Companies Act was that a section 551 authority was required for the issue of shares in different classes and that the authority needed was to be in either a separate resolution or given in the company's articles. I have also come across, again specifically in the case of alphabet shares, section 551 authorities (in articles and as resolutions) where the authority is limited to 5 years (as required) but is not limited to a maximum nominal amount. Again, my understanding of the Companies Act is that this is incorrect and the authority is not valid without the required maximums. Is there a carve out of the section 551 provisions specifically relating to alphabet shares, or should my understanding of the act apply in these situations? I look forward to your comments.
Do you know if there is anything stopping a UK-quoted company (PLC incorporated in England and Wales, registered office and headquartered in England) from holding its AGM in Northern Ireland? I can't see any provision in the Companies Act, Corporate Governance Code or Listing Rules.
The AGM notice of an LSE-listed company gives notice of ordinary resolutions to re-elect named retiring directors. Can a shareholder propose an amendment to one of the resolutions, substituting the election of an alternative candidate for the retiring director [assuming he noticed provisions in the articles for amendments of resolutions (48 hours) and appointment of a director by the company who is not recommended by the board are complied with]? If so, what is the authority that such an amendment is valid and must be allowed by the Chairman to be put to the vote?
Does the failure to give requisite notice of an AGM invalidate any resolutions passed at that meeting? Regulation 39 of Table A specifies that the accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting. Does the same apply where requisite notice has not been given (and there is no consent to holding the meeting at short notice)?
Is it illegal for someone to distribute inaccurate meeting minutes either deliberately or unintentionally? For example, is it illegal to include confidential information which was stated in a separate written document, in purported meeting minutes, when in fact that confidential information was not mentioned in the meeting itself?
If the anti-dilution provisions attached to a class of shares are varied but with no overall economic effect, is this a variation of class rights? (Anti-dilution provisions changed from a conversion rate to a bonus issue.)
I have read your material in respect of Bonus Issues with interest and would be grateful for some clarification on the following point. It is understood that it is usual for a ratio to be provided when effecting a bonus issue e.g. for every four shares owned, members will receive one additional share. However, what is the position where fractional shares are concerned i.e. for every 130 shares owned, members will receive 370 additional shares. Is is possible to phrase the bonus issue like this or would it be suggested that for every 1 share owned approximately 2.8 additional shares will be received?
When selling Company shares that are held in joint names, does the Company need the consent of both of the joint shareholders before the shares can be transferred? If the Company does not need both shareholders' consent, is there any course of redress the other named shareholder could seek, either against the company or the other named shareholder?
My question relates to directors abstaining from voting at a directors' meeting. Article 88 of Table A stated that: "Questions arising at a meeting shall be decided by a majority of votes". As an abstention is an absence of a vote, my interpretation is that a vote split as follows: Yes: 4 No: 3 Abstain: 3 would count as a 'yes' decision because, of the seven total votes, 'yes' had the majority. Under article 7 of the new model articles, however, the language has changed. It now refers to a "majority decision at a meeting". Does this change the above interpretation? If the same split of votes occurred in a company governed by the model articles, one could argue that only four directors of the ten forming the quorum voted for 'yes' and that therefore no majority decision took place. In other words, has the emphasis changed from counting votes actually cast to measuring the majority view of the meeting?
We have held AGM in the past and will be holding one soon for this year. Although we have a plan to amend our Articles to adopt the new model version of articles, it has not been done and so our Articles still say Table A of 1985 Act is adopted. In our AGM minutes we would like to refer to the Articles 40 and 42 of Table A. Have they been replaced? I appreciate there is no need to hold an AGM in the 2006 Act but we think there is a benefit in holding an AGM every year.
The Companies (Tables A to F) Regulations 1985 has a model memorandum for a private company limited by shares under the old legislation. Clause 4 of the model states "4. The liability of the members is limited". It does not state how the liability is limited. I am looking at a pre-Companies Act 2006 company which uses the above wording (Target). Section 3(2) of the Companies Act 2006 states a company is a company limited by shares if "liability is limited to the amount, if any, upaid on the shares held by them". The new standard Model Articles has that wording, in regulation 2. Does Target qualify as a company limited by shares without the above wording?
We're dealing with a slightly awkward share purchase whereby investors are selling their shares to a new majority shareholder. Immediately following the purchase, we need to change the articles and vary class rights. For the sake of ease, we want to have the new shareholder sign the resolution and give the consents for the new articles and variation and have this happen immediately after the transfer (dealt with at same directors' meeting). However, the transfers won't have been stamped at that stage. My question is whether share transfers are valid notwithstanding that they haven't yet been stamped and whether the company can treat the transfer as having been completed and amend the register of members (and the new member then sign the resolutions etc.) pending stamping?
1.Does section 551 of the Companies Act 2006 apply to issue of Preference Shares by a private company? 2.Where can I find a specimen resolution for issue and allotment of Preference shares by a private company?
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 have read the following response given to someone on the issue of whether shareholders are entitled to see the Minutes of Board meetings. In respect of a company with Table A Articles (in which Article 109 is relevant), if authorised by the shareholders by ordinary resolution, are the shareholders entitled to see the Board Minutes? Would they be seen as "documents" of the company? http://corporate.practicallaw.com/5-519-1412
If a limited company has now closed (this is stated on the Companies House website under 'action event/date') does that company have a right to still have the word 'limited' in its title? I'm drafting a contract and half way through negotiations the limited company appears to have become an unicorporated association and I'm unsure whether I should still call them "limited".
There are two shareholders with 50% each ordinary shares. One has agreed to retire and the company will buy his shares out over time, subject to profits. The outgoing shareholder wants to convert his shares to fixed price preference shares with fixed rate dividends, cumulative and convertible. Can he reclassify his ordinary shares to preference shares? I have at the back of my mind he can't, but must cancel his ordinary shares and then apply for and have allotted new preference shares? Any clarification would be appreciated.
I have a new company that was formed last year as a vehicle for a joint venture. 32000 £0.01 shares were issued at the oustset, and the "investors" were going to subscribe to 68000 £0.01 shares at a premium at a later date. Completion was delayed, and the share split is now going to be 30000/70000. I need to cancel 2000 of the £0.01 shares to get the correct share number ahead of issuing 70000 new shares to the investors. I was planning to do a company share buyback at £0.01 per share for the 2000 shares and then cancel them. We will then issue the 70000 shares at a premium at the point that the investment is ready to complete (most likely in a month). The issue I have, is that the company has posted a loss for the year (ahead of trading), so it can't technically fund the sharebuyback out of profits (as it has none). Are the shareholders simply able to hand back/transfer the shares to the company at nil value for the company then to cancel them? If so, please can you point me in the direction of the correct guidance. I look forward to hearing from you.
I have a question regarding capital reduction - based on my experience, capital reduction is usually employed through returning share capital to the shareholders of the company, and cancelling a corresponding number of the issued shares of the capital, such that a company that say originally had GBP1000 in share capital value represented by say 1000 ordinary shares would now have GBP800 in share capital value represented by 800 ordinary shares after the capital reduction is completed. I was wondering whether there is any material or cases on PLC which would prohibit or in any way cast doubt on the possibility of returning capital to the shareholders WITHOUT cancelling or reducing the number of issued shares? So far, I cannot find any material or cases which either affirms that this can be done, or prohibits this from being done. I would have assumed that given the abolition of the concept of par value of shares, there is no longer a fixed value represented by the shares, and the reduction in the share capital value without a corresponding number of issued shares would all the more be possible. Just for your information, the reason that I am considering the question is because it is the intention to preserve the shareholding proportions between the various shareholders of the company though maintaining the current number of shares issued to each such shareholder. Many thanks in advance for your assistance on this, it is much appreciated.
Under the Companies Act, the Company has to normally issue the share certificate in written form within decided period. In case of listed companies, they can use CREST. But, in case of a normal private company limited by share, CREST cannot be used. So, such company has to issue a share certificate. Where a private company is a fully owned special purpose vehicle, it seems efficient if such a company could avoid the need to issue the share certificate to a single shareholder. Is there any way of achieving this?
Do you have available a form of wording of a shareholder resolution approving a share capital reduction (where that reduction is by a private limited company, supported by solvency statement and is specifically for the purposes of creating distributable reserves to be used for a dividend)? More particularly, I'm trying to ascertain whether there is any requirement to specify what happens to the paid-up capital pertaining to the shares being cancelled in this context. Thanks for any assistance.
I'd like your view on whether a company can lawfully capitalise its revaluation reserve for the purpose of issuing and allotting bonus shares to its existing sole shareholder. Section 849 CA 2006 states that a company cannot apply unrealised profit in paying up any amount unpaid on its issued shares, but the guidance in Tolleys, Butterworths and Buckley suggests that it can do so as bonus shares expressly fall outside the ambit of the meaning of "distribution" within section 829 of the Act. My reading of this is, therefore, so long as the application is to a bonus issue (ie treating the new shares as paid up by an amount equal to the capitalised sum) rather than an existing share which is not fully paid up it is OK. I have to say I don't understand the logic for the distinction as the two seem to amount to the same thing.
May I please ask what is the position for a (non-quoted) plc which will not have its audited accounts ready by its AGM deadline? Would it be more correct to hold an AGM within its deadline and then adjourn it, or to hold it when the deadline has passed but when the audited accounts are ready?
If e.g. a company is owned by two corporate entities and a resolution needs to be passed for the payment of final dividend, does that resolution need to be signed separately (i.e. a resolution from each corporate entity) or jointly?
My question concerns the redemption of preference shares by my client company. Notice to redeem has been issued and redemption has taken place in respect of all but a very small minority of the shares. These are held by two shareholders resident in the USA. Neither shareholder has responded to the notice, nor has my client been able to contact them by email addresses held for them. My client company is in the process of a sale and the Purchaser’s have said they require to purchase the entire issued share capital; operating a squeeze out where necessary. Since the only shares left in this class of preference shares are those referred to above it will not be possible to operate squeeze out for this class of share. The articles state “… upon such redemption date [the date referred to in my client’s notice], each of the C Preferred shareholders shall be bound to deliver to the Company at such place the certificates for such of the C preferred Shares concerned as are held by him …”. Is there any way that the Company can treat the shares as being forfeited or redeemed as a result of the shareholder’s failure to comply with this obligation?
We should be most grateful if you could assist with an issue that has arisen regarding the precise nature of the records that a company is required to keep or to make available for inspection. Our understanding is that s 1136(2) of the 2006 Companies Act does not define the records to which the Companies (Company Record) 2008 Regs relate, but simply provides for places other than a company's registered office at which company records required to be kept available for inspection under certain provisions may be so kept. It does not say that these are all the records that a company is required to keep or to make available for inspection. Accordingly, it would be incorrect to assert that the 2008 Regs specifically relate to the documents identified in s 1136(2) and not to ALL company records. If our understanding is incorrect, please will you direct us to the authority? Alternatively, if you agree with our interpretation, please will you let us know?
I am trying to find the wording for a variety of shareholders who will be having different rights than the majority shareholders. These shareholders will only have dividend rights and if the Company is sold will then be entitled to their equity shares. I can't seem to find a section which deals with different classes of shareholders. Please help me.
Please clarify the procedural steps required to issue a new category of shares in a limited company. The company presently has only ordinary shares but the company wish to reclassify so that there are 95% ordinary shares and 5% ordinary 'B' shares which will carry the same voting rights and dividend rights as ordinary shares but will be redeemable (the current ordinary shares were not elected to be redeemable). Once the new share category is created what further steps will be required to issue further shares in that category. Although the 'B' shares will initially be only 5% of the total shares in the company, the percentage is to increase by 5% per annum to a maximum of 20%. Many thanks.
If the articles exclude the provision in Table A which states that the first joint shareholder mentioned on the register of members is able to vote to the exclusion of the other joint holders, then what situation would apply? If s288 CA 2006 is not expressly excluded, would this still apply or will it be implicitly excluded? If s288 does not apply, would all joint holders share the vote by majority or would something else apply?
My client, an unlisted PLC, has asked me to prepare a notice for their AGM. Historically they hold a board meeting at which the accounts are approved and they are then laid before the Company at an AGM held immeditely after the board meeting (having obtained unanimous consent to short notice from their two shareholders). This year however, as a result of changes to the auditors of the ultimate parent, new auditors are to be appointed at the AGM for the following term. The outgoing auditors have agreed to submit a resignation letter dated as at the AGM, but the Company and its shareholders still want to go ahead with the meeting held on short notice. I believe that because of the provisions of section 515 of the Companies Act, we need to give 28 days notice. If both the outgoing and incoming auditors and all the shareholders consent can the meeting still be held on short notice?
I am trying to find a template for a written resolution varying share class rights and class name, but I cannot find one on any of the searches I've done on Plc. I've used the search facility and also looked at the documents under the different topics. Please can you assist at all?
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?
We act for a private limited company which was incorporated in the 1970s. The articles adopted Table A from Companies Act 1948 (as amended). We are currently updating the Articles which have not changed since incorporation and will be based on the Model Articles. We understand that under the provisions of the Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (Fifth Commencement Order) the chairman can still have a casting vote at a general meeting in the event of equality of votes, whether on a show of hands or on a poll as the articles of a company provided for the chairman to have a casting vote immediately before 1 October 2007. Does any special drafting or wording need to be included in the new Articles to support the article dealing with the chairman's casting vote at a general meeting (such as reference to the Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (Fifth Commencement Order)), or would it suffice to simply adopt the standard wording based on Table A? Thanks.
A client of mine would like to set up an organisation solely for the membership of women. The aim of this not for profit organisation is to promote the rights of women in a particular sporting industry. The organisation would probably firstly be set up as a limited company and then may eventually become a charity. The organisation would only allow members to be female and would exclude men from participating in every part of the organisation including meetings etc. Would this breach any equality legislation, if so, which and how? For clarity, this organisation is not being set up in relation to domestic violence or for religious, racial or cultural reasons.
Are you able to explain the difference between share warrants / equity warrants and warrants to bearer? Futher, are there any specific provisions of the Companies Act 2006 that should be complied with when issuing share warrants (apart from checking the company's articles of association to ensure that the company can issue share warrants)?
The seller of a company has lost a historic stamped stock transfer form and there exists no supporting evidence to show that this transfer occurred apart from what had been written up in statutory registers at the time (HMRC do not keep records of stamped STF's). What method would be the simplest and cheapest to give any potential buyer reassurance that the title had passed? Both s125 Companie Act (CA) 2006 (power to rectify) and s127 CA 2006 (the register of members being prima facie evidence) have been noted.
Am I correct in believing that the former Section 24 of the Companies Act 1985 requiring not less than 2 members of a public company and making a single member of such a company which carried on business for more than 6 months jointly and severally liable with it for its debts was repealed on the inception of s. 38 of the 2006 Act on 1 October 2009 ? I would welcome your guidance.
Party A has been trading as a sole trader for the past 6 months. After some success they now wish to register the company with Companies House. However, a rival (Party B) has registered Party A's name on Companies House, not for their own use but to prevent Party A from being able to register. There is evidence to suggest that this is the case. What remedies are available to Party A and can they go on to register their name, bearing in mind they have goodwill and a growing reputation?
I have a client company (private not PLC) which has a small number of shareholders holding a very small number of shares that have been untraceable for many years. My clients want to tidy up their share register by buying back/cancelling these shares. I cannot find a procedure for this. Are you able to help? Many thanks.
I have a client company who would like to issue shares to a director staggered over a period of time. Do you have a suitable agreement for this and are there any issues to watch out for when alloting shares over a period of time?
"The effect of restoration by way of a court order is that the company is deemed to have continued in existence as if it had not been dissolved or struck off (section 1032(1), CA 2006)." (Practice note, Restoring a dissolved company to the register of companies) Does a company arguably have locus standi or legal capacity when it is in the process of restoration? Could it start proceedings for the recovery of a debt, for example?
In a contract for purchase of own shares can a power of attorney be incorporated giving the company control over the shares until they are cancelled? Particularly in circumstances where the contract is 'exchanged' but completion is conditional on, for example, a fresh issue of shares to take place in the future to fund the final purchase.
I have looked at your standard document detailing a waiver of pre-emption rights with interest. I am aware that instead of producing a waiver that relates to a particular allotment, it is possible to produce a general waiver relating to all future pre-emption rights. I should be grateful if you would advise as to how the drafting of such a general waiver would differ and as to whether there are any maximum amounts or limits involved i.e. should a general waiver be drafted to account for an allotment of up to a certain percentage of the company's share capital? Is there a time limit on general waivers of preemption rights?
Is a shareholder/ members' resolution binding on the board of the company? If a member/shareholder puts forward a resolution at an AGM, are there any circumstances under which the board may be able to ignore the resolution, or is a resolution passed by a majority always binding on the board?
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.
In respect of the filing of ordinary resolutions with Companies House I note the comments you have made in relation to s.29/30 Companies Act 2006. You state that resolutions which affect a company's constituion need to be filed and that this includes resolutions that affect the company constitution by way of 'enactment' (which may include ordinary resolutions). This suggests that enactment is a substitute term for 'ordinary resolution'. I note, however, that S.29(1)(e) states: "any other resolution...to which this Chapter applies by way of any enactment." This suggests that an enactment is different to a resolution. Could you therefore clarify in what circumstances an ordinary resolution would need to be filed at Companies House?
Can a shareholder surrender his shares in a company by way of a stock transfer form? The consideration for this would be nil and I would have thought this was permissible under section 659(1) of the Companies Act 2006, as there is no valuable consideration. Upon the surrender the shares are to be cancelled. Would the above procedure be effective to surrender the shares or should the off-market purchase procedure be followed?
Bearing in mind the requirement under section 580 of the Companies Act 2006 not to issue shares at a discount, how does one determine whether this rule is being infringed when issuing shares on a capitalisation/bonus issue? I have in mind that the rule is taken to mean that the share issue cannot result in the issued share capital exceeding the company's net asset value but am not sure whether this is correct or where the rule (if it is correct) comes from/what authority there is for applying section 580 (or its predecessor) this way.
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 wanting to increase the share capital of a UK company. The company was incorporated under the 1985 act so I understand that I need to draft a board meeting and resolution for s550 to apply. However, in the articles, it refers to the memorandum for the maximum number of shares, which is currently 1000. It also states in the memo that the company has the power from time to time to increase or reduce its capital. In the section of the articles that refers to the memo it also states "or such other amount as shall be authorised by the company in general meeting". Is this flexible enough to allow for just a board meeting altering the articles so that s550 applies or do I also need to draft a resolution to remove this "limit" from the articles?
In relation to the Practice Note on Waiver of Dividends, I wondered if you could advise of the legislative or common law source for the following statements: 1. To be effective, a deed of waiver in respect of a dividend must be received by the company before the right to the dividend arises; and 2. In order to waive a dividend, a formal deed of waiver is required.
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?
I am trying to obtain a list of companies for 2010 and 2011 which had their remuneration reports voted down. I am looking at FTSE 350 companies and if possible those that received 20% plus votes against the remuneration report. It was possible to do this for the 2012 AGM season but not going further back.
We act on behalf of a client who purchased a company approximately a year ago. He now intends giving a 50% share to a prospective employee. It is intended that the employee will forgo her first £15,000 in bonuses to pay for the share. The employee does not wish to be taxed on this £15,000. Would a separate Shareholder's Agreement assist in this respect? Additionally, it is intended that if the employee leaves the company then she would be obliged to sell his shares back to the company for the price he paid for them (ie. a maximum sum of £15,000). Do you have a precedent of such an Option Agreement? Finally, do you have a precedent for a Shareholders' Agreement and a Directors' Agreement / Employment Contract?
We act for the Executor of a person who was sole shareholder and sole director of a company. The company is subject to Table A under the Companies Act 1948. You may assume that the Executor has been been registered as holder of the Deceased's shares in the company. Directors need to be appointed and in order to do this, does the Executor have to go through the provisions of Section 292 of Companies Act 2006 or can he just sign a written resolution appointing directors?
A client requires a set of "Companies Act style" articles of association for its yet to be incorporated offshore company, which will be reviewed by local lawyers when it is incorporated. As the company will be subject to (eg) BVI law, I am reluctant to use a set of articles which incorporate Table A by reference, or refer to the Companies Act. Do you have any precedent articles which are based on Table A/Model Articles, but which have the full text of Table A/Model Arts already incorporated into them?
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
On a Bonus Issue of Shares do the shares issued have to be of the same class as shares held by the exisiting shareholders ie. if the exisiting shareholders hold 1 B ordinary share can the bonus issue to them be for redeemable preference shares? - a different class of share?
I am putting together a shareholders' agreement where in the event of transfer, the company has the option to buy-back shares if it has the distributable reserve to do so. My client's accountant has suggested that the agreement contains a requirement for the buy-back to be dealt with by way of capital reduction. Whilst this may be a route, I would have thought that the reserve created would simply give the par value of the shares in question and would not therefore assist where there was an intention to buy-back at a market value. Your overview on capital reductions alludes to them being used in the context of a buy-back or redemption but does not make it clear exactly how this would work. Can you please give me some additional guidance of how this could be applied in practice?
This is a question in relation to "Golden shares" (Special Shares). I understand from the definition on PLC that these are a "single special rights redeemable preference share in a company held by a government minister". My question is whether these Golden Shares can only be held by a government minister? Could the relevant entity state in its Articles of Association otherwise? Assuming such a Golden Share can be issued to a company limited by guarantee (for example), what would be the procedures to accept this? I would imagine a board resolution would be sufficient?
I am looking for information on Share Warrants and the standard terms under which these are generally issued. I had understood that they simply give a right for the holder of the warrant certificate to subscribe for a certain number of shares at a certain price, however, I have seen documents from other sources which seem to suggest dividends can be paid to the holder of share warrants rather than the shares themselves. Please could you provide information as to how share warrants work and where I can find documentation in this regard?
I act for a company whose shares are listed on Plus Quoted. My understanding is that any shareholder on the register of members on the date of a general meeting is entitled to vote. Therefore, a statement "Shareholders must be on the register no later than 18th May to be able to vote" in a notice of meeting to be held on 22nd May would be invalid. There is nothing in the articles to restrict voting rights in this way. Do you agree?
A company used a company stamp to sign legal documents. The company changes name and so needs to get a new stamp. Are there any specific rules/regulations that need to be followed i.e. does the stamp need to be obtained from a particular source or registered?
I would like to put forward a suggestion regarding What's Market that one of our Professional Support Lawyers made. She was trying to find AGM notices that had a disapplication of pre-emption rights which were over 5% and didn't involve AIM companies. We searched AGM notices and were able to view the disapplication of pre-emption rights section and the percentages,and also chose FTSE 350 as a category. What we couldn't find was a nice way of searching to bring up all notices over 5%. We ended up just picking numbers to search against and we did find several for 10%, 15% and 20%. Is there a better way of searching for this information and if not could one be made available please.
I have a corporate client, and under the terms of the shareholders' agreement a "deemed transfer event" has occurred in respect of one of the shareholders (who is also an employee and director). His Ordinary shares will be transferred to the remaining shareholders pro-rata, but there is also a single A share. My client would like that share simply to be "cancelled". I believe this cannot be done without going through the full buy back procedure, albeit the consideration would only be £1.00. Is there any other way of doing this please?
I should be grateful for some clarification on the following point: Subject to parliamentary process, the government would expect legislation on new shareholder voting rights and revised reporting requirements on directors' pay to come into force in spring 2013 and take effect for companies whose reporting years end after 1 October 2013 and for directors whose contracts are terminated after that date. Consequently, the new provisions would impact on general meetings held after 1 October 2013. Does this mean that, for a June year end company, the new rules would come into force for the year commenting 1 July 2014 (in which case the proposals would impact the Autumn 2014 AGM with respect to agreeing remuneratin plans in advance), or is it the AGM date which drives the implementation (ie the Autumn 2013 AGM - which would be approving the remuneration of the year ended 30 June 2013, and pre-approving the next year's pay)?
Is there a document on practicallaw that summarises all disclosures/documents that a UK listed company needs to have on its website? i.e. a composite list covering all Companies Act, FSA and other requirements?
I understand that where, for example, an issued ordinary share is redesignated as, for example, an A ordinary share, it is necessary to file form SH08 (with regards to the redesignation) and form SH10 (with regards to the variation of rights). Where new classes of shares have been created (e.g. A ordinary, B ordinary, preference etc) and are yet to be allotted, will forms SH08 and SH10 (or any other forms) need to be filed with Companies House or would it only be when the different classes of shares are allotted that Companies House would need to be notified in form SH01? It is not entirely clear from the notes or the Act whether a form will need to be filed where new classes of shares are created as opposed to where issued shares are redesignated.
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?
I refer to practice note on SDRT and to practice note on share buy-backs. In the SDRT practice note, you state, under "Transfer" that a purchase of own shares by a company does not give rise to SDRT. However, this appears to conflict with the practice note on buy-backs, under "Stamp Duty" which reads "the obligation to pay stamp duty, or possibly SDRT,". Would you be able to clarify whether a company purchase of own shares may give rise to SDRT. In addition, in your opinion, would SDRT be applicable where the agreement for the purchase of own shares includes a delayed completion (for example, pursuant to a multi buy-back where the agreement is entered into on day 1, with legal title to the shares to be transferred in several annual instalments).
Hello, I wondered whether you could assist with a query regarding a written resolution passed under the Companies Act 1985. Under the 1985 Act, a written resolution required unanimity, however it was still usual to refer to a written resolution being passed as an ordinary / special resolution. If a written resolution filed with Companies House refers to itself as having been passed as an ordinary or special resolution is it still valid? My inclination is that a written resolution is a written resolution under the 1985 Act (which seems to be borne out by section 381A (6) which refers to a written resolution being passed as an alternative to an ordinary or special resolution) and provided the written resolution was validly passed, the reference to an ordianry or special resolution is irrelevant, but I wondered whether PLC had ever come across a situation where a written resolution under the 1985 Act purported to be passed as a certain type of resolution and whether this had any effect.
As a multi-national group with a non-UK top company, listed on a non-UK stock exchange, do we need to show all the 100-plus group companies names and registered offices on our website? I believe this would be a requirement for a UK company but, if our UK companies are 100% wholly owned and several tiers down our group structure, does the entire group need to comply and/or do they?
Rather than simply waiving a dividend, can a shareholder opt instead to waive the balance of an outstanding intercompany loan as deemed payment of a dividend (provided the company has sufficient distributable profits to declare the dividend in the first place)?
Please could you advise if there is a definition in respect of the exemption to requiring shareholder approval of significant property transactions, where the transaction is "between a company and a person in his capacity as member"? How is this determined and in what circumstances?
We are looking for a share buy-back agreement, however, cannot seem to find one on the PLC website. For the sake of clarity, our client is selling their shares back to the company. Please confirm whether you have an agreement which would be suitable.
Can a company register a transfer/acquisition of shares whilst the transfer is being adjudicated and adjudication stamp to this effect under (section 42, Finance Act 1930 Finance Act 1995). Or does the company have to wait until the adjudication stamp is given?
The directors of one of our trading subsidiary companies (FSA Regulated) have decided to novate all its current contracts, transfer its business to another subsidiary company and make the company dormant. Do you have a checklist of steps and template documents to effect this corporate action?