Section 899 Companies Act 2006 states that the scheme needs to be approved by a majority in number representing 75% in value of members or class of members. What does "value" mean for this purpose? Is it nominal value, or voting rights attached to the shares? (Your practice note advises a poll because of the value element, which suggests voting rights are relevant.) There doesn't appear to be any definitive authority. By analogy, the Insolvency Rules 1986 state, in 1.20, that the value of members is determined by reference to the number of votes conferred on each member by the company's articles. Is that the correct approach here?
Where a company is undertaking a reduction of capital and is extinguishing its share premium account, should the proceeds of the share premium account be repaid to the shareholders on a pro rata basis depending on the number of shares in the capital of the company held at the time of the reduction (in the same way as the share capital account), or should it be repaid on the basis of the premium each shareholder paid on his or her shares?
In connection with a purchase by a company of its own shares, could the seller of those shares take security from the buying company so that, if the shares were not purchased as per the agreement, the security could be enforced?
Will a not for profit sporting organisation (a golf club) fall into the first condition of regulation 3, part 2 of The Company and Business Names (Miscellaneous Provisions) Regulations 2009? The exemption from requirement as to the use of "limited" in the Company name states that the objects of the company must be for either the promotion or regulation of commerce, art, science, education, religion, charity, or any profession, and anything incidental or conductive to any of those objects. I am surprised that sport is not listed here. Do you think a golf club could fall under one of the above categories?
In relation to the register of members, are corporate shareholders required to give their registered office or principal office address details for the purposes of s.113(2)(a)? I note that for corporate directors, pursuant to s.164(b) the registered or principal office address must be given in the register of directors. What is the position for the purposes of the register of members? Could a different address, not being the registered office or principal office of the corporate shareholder, be provided?
A company is granting employee share options that fall within the company law definition of an employee share scheme. The company's articles contain pre-emption provisions that override the statutory pre-emption provisions (i.e. you have to offer the shares to different groups in priority to other groups). Do we need shareholder approval to specifically disapply the pre-emption provisions in the articles because the statutory exemption is not relevant here? Thank you!
We have a situation where a limited company with 3 shareholders has come to us. All shareholders agree that in 2005 (when there were only 2 shareholders) the intention was that the new shareholder would receive as a gift, 20% of the shares in the company for nil consideration. For reasons unknown to the shareholders, the company accountant at the time allotted 125,250 shares of £1 to the new shareholder and recorded on Form 88(2) and in the accounts since that these shares were unpaid and so a debt due to the company for the nominal value of the shares. Although the number of shares reflects ownership of 20% in the Company, it shows that the new shareholder owes the company £125,250, which was not the intention of the parties at the time. What is the best way/how is it best to resolve this situation?
My query is in relation to the termination of a company secretary. If a private limited company wishes to terminate the appointment of its company secretary, whether that be corporate or an individual, does it need to provide formal written notice of its intention to do so to the company secretary before preparing the paperwork necessary for the Board and Companies House in relation to the removal of the company secretary? There is no requirement to do so under the Company's Articles of Association.
What is required, under s.30 CA 2006, to be filed at Companies House where a special resolution is passed at a meeting rather than by written resolution? I am wondering what constitutes a "Written memorandum setting out its terms"? Do minutes of the meeting suffice - if they entail the wording of the special resolution? The context is a company limited by guarantee which is having an extraordinary general meeting to adopt new articles of association. Notice has been sent out within the proper notice periods containing the wording of the special resolution to adopt the articles.
Have you got any wording for deed of indemnity for a lost share certificate that would be appropriate where the holder of the lost certificate is now in administration? I.e., wording that would be suitable for an administrator to agree to.
If a company has more than one shareholder and the articles state that the quorum is 2 shareholders (or proxies or representatives) then a meeting where one shareholder attends who also holds the proxy for a second shareholder is not quorate as it would need two people to be physically present? If a company has more than one shareholder and the articles state that the quorum is 2 shareholders (or proxies or representatives) then a meeting where one shareholder attends who also holds the proxy for a second shareholder is not quorate as it would need two people to be physically present?
Am I right in my understanding that the Articles can set out a different requirement for the variation of class rights to the CA2006 default position? For example could a set of articles allow class rights to be varied by a special resolution of all the shareholders (and not just a special resolution of the class concerned), even where the voting rights attached to the class concerned equate to significantly less than 25% (i.e. the holders of the shares of the relevant class would not be able to block the resolution varying the rights attached to their shares)? I appreciate that sections 994, 663 and 664 would still be available to the holders of the class having its rights varied.
I have a query in relation to Special Resolutions of a company. What specific boxes must a resolution tick before it is designated as a special resolution? Would a resolution in which the members voted to dispose of an asset be a special resolution? In these circumstances would Companies House need to be notified? Any help would be appreciated.
We are a private company with around 60 shareholders. One of these is a nominee company who has expressed an interest in selling their shares. We would like to know who is 'behind' the nominee shareholder - i.e. the beneficial owner. However, I note that section 793 of the Companies Act authorises public companies to enquire of the beneficial ownership details from nominee shareholders, but this provision does not seem to extend to private companies. Is this correct? If so how can we require the nominee to reveal the beneficial owner's identity?
Under s899 Company Act 2006, a majority number representing 75% can agree an arrangement. Voting can be done by proxy. If we have 100 shareholders and 50 shareholders decide to vote by proxy through the Chairman, is the Chairman's vote counted as 50 votes, or as 1 vote? I am asking in case only 2 shareholders turn up for the meeting and one is against the arrangement. Is there any guidance for this?
Company A wants to make a dividend payment to its sole shareholder, Company B. It is unable to do this due to a lack of distributable reserves so arranges a reduction of capital. Company B will pay the dividend it receives to its own sole shareholder and overall group parent, Company C. Is it possible for Company A to make a direct transfer to Company C, following the reduction in capital? The Board of Company B is willing to authorise this. Companies A and B are both incorporated within Europe. Company C is Japanese. Does this complicate the intra-group transfer of cash in any way?
Can a company, which is in Administration, effect a Capital Reduction (using a solvency statement, rather than asking the Court) whilst it is in Administration on the assumption that following a period of trading it is now a solvent company. If so, what role would the Administrator play in the process? Many thanks.
Following on from this query:General meeting: can a single member company host a general meeting by way of telephone conference in order to remove a director under the section 168 procedure? Where the Articles of a company exclude the Model Articles and there is no express provision for meetings to be held by electronic means, will it be necessary to follow Byng - i.e. to ensure that all participants can both see and hear each other?
Under the Return of Surplus paragraph in the article on Reduction of Capital, it states that "a reduction of capital under Section 641(4) will involve a direct payment to shareholders and will not involve the creation of a reserve." Is there any case law to support this? And in specifically what circumstances can a reserve account be avoided? Does this only occur when a company does not have any accumulated losses that can be offset by the creation of a reserve? Thanks
I am setting up a user led charity for disabled people as a company limited by guarantee for a client. They want to make sure that all members are disabled persons but would like to be able to appoint non-disabled directors to the board of the company to help with administrative matters. Is it possible to appoint a director to the company limited by guarantee when they are not a member?
Is it possible to include a shareholder being served with divorce proceedings as an event which triggers a compulsory transfer back to a majority shareholder and/or the Company in the Company's articles? We act for a sole shareholder who is making a gift of a minority of shares in her company (where she is the sole shareholder and director) to her sons, who are both married. Having been through a messy divorce herself, she would like to include a provision in the articles that, if either of her sons are served with divorce proceedings, then the shares will automatically transfer back to her or the Company.
There are two aspects to this question. First is the extent to which the preference shares described below are debt rather than equity. The second is whether, having established that the shares in question are "debt" they can be converted to ordinary shares in a debt/equity swap. This concerns a private limited company with two classes of preference shares. The A prefs bear annual interest at 5% and are redeemable on a fixed date. Interest on the A prefs is payable in preference to any redemption payment on the B prefs. The B prefs are non interest-bearing and are redeemable by instalments on fixed dates. On a liquidation, capital reduction etc.: • B prefs have preference over the A prefs; • A prefs are next in line for both repayment plus interest; • thereafter the A prefs, B prefs and the ordinary shares are paid pro rata as if they constituted one class. The preferences shares are beyond their redemption date and the Company is not in a position to redeem them. The Company wishes to restructure its share capital by converting the preference shares to ordinary shares and the preference shareholders are willing to agree to this. Can the proposed restructuring be dealt with as a debt/equity swap?
I am looking at a scenario whereby three companies are in a vertical line, Parent, Subsidiary and Bottomco. Parent owes Bottomco a debt, which is to be assumed by Subsidiary. Subsidiary has no distributable reserves and will be assuming the debt for £1 consideration. Does this amount to a distribution? The debt is considerably more than £1.
As part of a reorganisation and demerger I need to hive up to a parent company assets and liabilities with a net asset book value of £447,255. The distributing company has distributable reserves of £430,536. It is not possible to identify and separately transfer by way of sale any specific assets whose book value equates to the difference between the net book value and the distributable reserves. I am proposing that the two companies enter into a distribution agreement which will provide that the transfer of net assets is by way of a distribution in specie to the value of £430,536 with a balancing payment of £16,719 to be paid by the transferee by way of consideration and to be left outstanding as an inter-company debt. Does this work within the rules relating to distributions generally and distributions in specie in particular?
If a limited company changes its registered address will it need to inform every third party that it has contracted with that the old address for serving a valid notice under their agreement has changed? Further does a letter going out to the suppliers need to be worded as a variation to the existing agreement i.e. in accordance with the relevant variation clause within the agreement?
I note in your disclosure letter you only refer to "disclosed" in lower case rather than rely on the definition of "Disclosed" from the SPA. Please explain the rationale for not using the defined term for "Disclosed" in the Disclosure Letter and what the implications of using either a defined term (i.e. "Disclosed") v. not a defined term (i.e. "disclosed") are in a Disclosure Letter.
I understand that Section 550 of the Companies Act 2006 only applies to private companies with one class of shares both before and after the proposed allotment. As such, section 550 cannot be relied upon if the proposed allotment will create a new class of shares. I also appreciate that you can allot a new class of shares under section 551 of the Act instead. If, however, you allot the same class of shares and then, immediately after that allotment, redesignate those shares into a new class with different rights, can you rely upon section 550 for the authority to allot those shares?
I have a client being offered an underlease. The original tenant in the lease was a company. The Company converted to an IPS which then amalgamated with another IPS. It is this second IPS offering the Underlease to my client. I am aware that when IPS's merge, s51 of the IPSA 1965 declares that all assets vest without any conveyance or assignment. Solicitor for the IPS offering the Underlease considers that the lease was assigned under this legislation when the company converted. Having considered the legislation (s50-s54) I cannot see an express provision for automatic vesting of a Lease when the original company converted to an IPS. My understanding is this would have required express authority from the Landlord and an assignment from the Company to the IPS. S54 (6) would confirm this in that the previous registration fo the Company becomes void. Please can you comment on what you consider to be the position in such circumstances.
The articles of a company adopted in 2004 provide that any section 80 authority may only be granted by "a resolution of the company with a majority of 65 per cent." Will this restriction continue to apply to any section 551 authority which the company proposes to grant? I am aware that under the transitional provisions, any existing section 80 authorities at the time the new regime came into force were to be treated as if they were section 551 authorities. Is section 551 intended to prevail over more restrictive provisions in the company's articles, or could such a provision which pre-dates the new Act operate to require a 65% majority for authority to allot?
Am I correct in my interpretation of share buy backs that if the directors choose to go down this method and acquire certain shareholders shares (and not others), then specific shareholders could be targeted to diminish their shareholding? Providing, of course that the correct procedures are followed. My understanding is that shareholders cannot vote in respect of their own shares that are being targeted in any event and so if the other shareholders agree (over 50%/75% if capital)they could force the purchase? I note that in buybacks out of capital they could apply to the court to request the application to be refused, does this apply for other buy backs? Otherwise, am I correct that their only recourse would be a possible claim for minority protection?
I am dealing with a company re-organisation. The first stage involves putting in place a holding company by way of share for share exchange. I will be applying for exemption from Stamp Duty under s77 Finance Act. A requirement of this is that the target company and acquiring company must have matching register of members. I would appreciate your thoughts on how to deal with the subscriber share in the acquiring company. I would propose to issue it to one of the shareholders in the target company and then note in the transfer agreement that he will receive one less consideration share on the basis he holds the subscriber share (so that the shareholding are the same as in the target). The alternative as I see it would be to issue on incorporation the same number of shares in the acquiring company in the same proportions as in the target but then there would be double the number of shares in issue in the acquiring company than in the target albeit they would be held in the same percentages. Would you agree that the first option is preferable. Many thanks
Can a company (private) take out keyman insurance on the lives of its shareholders/directors so that (subject to compliance with CA 2006) it can use the proceeds it receives on the death of a shareholder/director to buyback the shares of that deceased shareholder/director? In order to ensure that the policy proceeds are used for the purposes of such a share buyback, can the shareholders in a shareholders agreement (to which the Company is party) place an obligation on the Company to use such proceeds to buy back the shares of a deceased shareholder (subject to compliance with CA 2006) or should the obligation be placed on the surviving shareholders (in a shareholders agreement to which the Company is not party) to use all their powers as shareholders to procure that the Company use the policy proceeds to buyback the shares of a deceased shareholder (subject to compliance with CA 2006)? Thank you
I am acting for the sellers on a 100% share sale. More than ten years ago the company conducted a share buyback, with the company's accountants supplying the transaction documents. The buyback shares represented slightly less than 30% of the share capital. There was (and still is) only one class of shares. At the time, these were held by three shareholders (including the shareholder selling his shares back). Unfortunately, the buyback agreement specified payment for the shares via monthly payments over approximately four years, and the buyback therefore did not comply with s.159(3) of CA85 (it was not drafted as multiple completions). My reading of Pena v Dale and BDG Roof-Bond v Douglas suggests that rectification is not available, and that the original buyback therefore remains invalid. The buyer knows about this issue as the defective buyback documents have been disclosed. Do you have any practical suggestions and options for dealing with this issue, so as not to jeopardise the current share sale? I imagine trying to conduct the buyback transaction now (if the shareholder can be located) would entail a payment (or a waiver) regarding dividends over the years, as well as various accounting, tax and Companies House corrections / refilings. Alternatively the buyer would have to accept the associated risks, with suitable indemnification from my client. Many thanks in advance.
I was asked to provide a case law on any derivative claim in the UK as an example in order to show how derivative claims work in the UK. I would be grateful if you could give guidance on this. Thank you.
In the case where a company is raising money by the issuing of new equity securities and the company has pre-emption rights included in its shareholders’ agreement and has asked all of its shareholders for a wavier of these pre-emption rights, but one shareholders refusing to sign it does this simply means that a pre-emptive offer must be made to that specific shareholder every time shares are issued? Or does this situation require unanimous shareholder waivers such that every and all shareholders must waive their pre-emption rights? Does the company have to make a pre-emptive offer to every shareholder if one shareholder will not sign the wavier?
We act for a company which has two shareholders (Existing Co). Is there any way in a section 110 reorganisation involving the introduction of a Holding company above Existing Co and the distribution of assets of Existing Co into Newco 1 and Newco 2 (both Newcos owned by Existing Co) that we can end up with a structure whereby one shareholder retains the shares in Existing Co and the other shareholder holds the shares in Newco 2?
Is it possible to create a class of shares which have no rights at all? ie. non-voting, no rights to capital, and no rights on liquidation? Would you have a simple set of articles that includes the necessary wording?
How are odd lots under a bonus share issue typically handled? For instance, if a company would issue 1 bonus share for every 3 shares: what happens to shareholders who have a number of shares which is not a multiple of 3? If a shareholder has for instance 5 shares, would he be entitled to only 1 bonus share? Would he also be entitled to a cash payment by the company to compensate the subscription right to bonus shares for the remaining 2 shares? Is there a mechanism whereby the shareholder would need to make an extra cash payment to obtain a second bonus share?
I have a client that wants a new class of shares issuing. The want to move towards a more dividend based income model rather than paying salaries. The problem is that there are 8 directors with very different shareholdings, 1.5% at the lowest and 17.% at the highest. Is it possible to issue a class of shares which have voting rights, have no value from capital but do have a right to income? The voting rights also need to be small enough so as to not interrupt the current control. If this is possible, what documents would I need to effect the change?
What rights to vote does a member of a company have in respect of his shareholding, which he has charged to a lender? In this case the legal charge is silent as to the exercise as to voting rights. The charge has not become enforceable.
My question relates to s 845 of the Companies Act and whether a subsidiary could create a reserve in a parent of a nominal amount to allow a transfer of an asset at book value as opposed to market value. The purpose of the subsidiary declaring the dividend in favour of the parent was to allow the parent to then transfer an asset (in this case the shares in the subsidiary) to the ultimate holding company. So my question is in relation to three companies and does not relate to the subsidiary (which has plenty of reserves) transferring an asset to its parent, but rather putting its parent into a position whereby that parent can transfer an asset to the ultimate parent. Thanks
Small solvent limited company - I seem to recall that there was a simple procedure available to return capital to shareholders without need for a MVL, provided at a very modest level...Thoughts please!
On incorporation of a new company electronically at Companies House, do all of the shareholders need to consent/subscribe for shares? Can shares be subscribed for and held on bare trust for another person?
In circumstances where proper notice of a proposed special resolution is given to shareholders and only say for example 5 out of 10 shareholders attend the meeting. In determining whether the Special Resolution is validly passed would you require 75% of the shares held by the 5 attending shareholders to vote in favour of the SR? i.e. you would disregard the shareholdings of those shareholders who do not attend?
We are acting for a company that has a 70% shareholder and a 30% shareholder. It is intended that the Company will buyback the shares of the 70% shareholder (thereby resulting in the 30% shareholder becoming a 100% shareholder). We would want to insert warranties in the buyback agreement - however given that the shares would be cancelled on buyback would the Company still be able to make a claim for breach of warranty as the shares would have been cancelled on buyback (and therefore potentially no diminution on the value of the assets due to breach)?
In relation to Employee Shareholders: we are in process of incorporating a new company, it is proposed that, as part of the initial allotments of shares, shares are allotted to individuals (by then employees of the company) under the employee shareholder regime. We note the issues around payment for the shares and representing money’s worth. The relevant shares being fully paid in consideration of the individuals entering into the arrangements. In due course this company would be re-registered as a public company. In the context of the proposed re-registration of the Company as a public company, we would welcome your view on the following: - for the purposes of section 91, would the relevant shares be included for the purposes of determining whether the Company’s allotted share capital met the authorised minimum ? - for the purposes of section 92 and 93, if the relevant shares are allotted BEFORE the date at which the relevant balance sheet is prepared as required by section 92, would the consideration for the allotment avoid having to be independently valued under the provisions of section 93 (and section 593)?
If a transaction involves a shareholder (S) in a private limited company (C) acquiring new voting shares in C in return for the exchange of his existing non-voting shares in C, must that be analysed as a buy-back by C of its own non-voting shares in consideration of the allotment of new voting shares, so as to engage the buy-back provisions of Companies Act 2006? If that is the case, would the allotment of new voting shares fall to be treated as payment for the non-voting shares out of capital? If the voting and non-voting shares have the same overall values, would it be permissible for the documentation to record that C pays S £x amount for his non-voting shares and that S then pays C the same £x amount to acquire the new voting shares, and (if structured in this way) would the transaction then fall within s692(2)(a)(ii) Companies Act 2006?
I act form a members club incorporated as company limited by guarantee under the 1929 companies act. I think it would be worthwhile updating both, is it possible to use the existing precedent to cover a club that is already incorporated. I am considering whether it was required that the company update their articles and memorandum as per the precedent 4-518-6821 given that the original company was incorporated under the 1929 companies act, or whether it could retain the originals.
A Company was formed under the Companies Act 2006 and it adopted the model articles. The Company issued 1,000 unpaid subscriber shares to its sole member on day 1, the Company has never traded and is about to be wound up. How should the issued share capital be dealt with?.
A company sent out a written resolution asking members to sign and return the resolutions to the company's registered office. The resolutions were sent out by the company's solicitors. The members signed the resolutions but returned them to the solicitor. My question is, is this sufficient for the company to be deemed to have received the assent or does returning them to the wrong address mean that the company has not received notice of the assent? Is the solicitor under any duty to forward on the incorrectly returned resolutions to the company?
We are advising the sellers in the sale of a private company (not a subsidiary of a public company). The bank are taking security over the assets of target and it is proposed that the buyer's directors will be appointed as directors of target prior to completion ( the seller directors having resigned) and that the buyer directors will pass resolutions addressing the concerns highlighted in your note on what remains of financial assistance - i.e solvency of the target and unlawful distributions. They also require shareholder resolutions to be passed approving the security documents which include guarantees given by target for the liability of the parent under the bank facility used to fund the acquisition and also adopting new articles. The key question to which we we would be very grateful for early advice concerns the risk to our client of the transaction being set aside on the solvency/ return of capital grounds. Specifically - as we understand it, the guarantee under the security documents is a contingent liability for target when assessing its net assets for the purpose of determining solvency/ whether there is a return of capital. So if the buyer becomes insolvent after completion of the sale and there was a call under the guarantee which caused target also to go into administration and the administrator then looked back to the sale transaction and found that the directors should have identified the contingent liability as giving rise to a solvency/ return of
Does Article 26 (5) of the Model Articles mean that directors may refuse to accept a transmittee as a shareholder or does it only apply where a transmittee seeks to have the shares transferred to someone else?
I am dealing with a group re-organisation for a client. As part of this re-organisation we are due to transfer an intra-group loan up the group structure by dividend in specie. The loan is actually evidenced by a Loan Note that is stated to be non-transferrable and was created without a Loan Note Instrument. Is it possible to create a registered Loan Note without a Loan Note Instrument being created for it to be issued pursuant to? If so, how do you transfer a Loan Note? I was going to transfer it by means of an assignment, but I am given to understand that you can treat the loan note as a share given that it evidences the indebtedness and just complete a transfer (although no form for a transfer has been settled by the issuer as the notes are expressed to be non-transferrable). As the issuer is another group company, there will be no issue with obtaining their consent to the transfer. Any help you can give in respect of the above would be greatly appreciated.
I am advising on a reduction of capital prior to the striking off of the company concerned. In the Practice Note: "Reduction of Capital: overview" it is stated that a reduction can be effected by a return of assets to shareholders. Could you please confirm that a reduction of capital under CA S. 641(4)(b)(i) or (ii) could be effected by the distribution of asset(s), including the release of debt(s) due from the relevant shareholder, and not just a cash payment? Thanks.
Where a cumulative dividend has not been paid to preference shareholders due to insufficient reserves, and the shares are transferred to a third party before any dividend is paid, would it be the current shareholder who has the right to the dividend when it is eventually paid or will the original shareholder have a right to a proportion of it?
Is there a particular procedure that needs to be followed for a company to reduce its share premium account and transfer the amount by which the share premium account has been reduced to its reserves? Given this does not appear to constitute a reduction of capital, I'm wondering if this needs anything more than a set of board minutes to evidence the decision and to instruct the accountants to reflect the agreed adjustments in the relevant accounts.
Where the Shareholders' Agreement does not specify how exactly the shares of a leaving shareholder (who is also an employee) are to be dealt with upon him leaving the company, can the leaving shareholder's shares be cancelled by way of a capital reduction or does it have to be a share buy back? The Shareholders' Agreement states that upon a shareholder leaving the Company 'the shareholder will enter into such agreement and execute such documents as are necessary for the transfer of his shares back to the Company'.
Is it possible to transfer or assign the right to a dividend either in whole or in part for a finite period of time? Does an instruction to pay a dividend to a payee other than the shareholder constitute such a transfer or assignment?
Please could you confirm the reading of a paragraph in the practice note on Redeemable Shares. "Redeemable shares must be redeemed by a company in accordance with the terms attaching to those shares. If a company wishes to redeem redeemable shares other than in accordance with the existing terms of redemption, it will need to change the terms of redemption and obtain the requisite class consent. Alternatively, the shares can be repurchased by way of a share buyback". Does this mean that two resolutions are required to change the terms of redemption, one from all the shareholders and one from those in the class of shares being varied?
With regard to section 793 notices, what information is deemed to confirm the identity of a person or persons interested in the relevant shares? The Companies Act does not seem to prescribe a minimum set of information, which needs to be disclosed.
Company A is a wholly owned subsidiary of Company B - let’s say there are 100 ordinary shares of £1 each. Company A needs a capital injection into its share premium account for one reason or another. Rather than issue new shares to Company B for £x, Company B is planning to enter into an arrangement to pay £x into Company A's share premium, not by way of a loan. Effectively, this could be viewed as an arrangement to pay additional consideration/subscription amount for the shares Company B already owns. I've never seen this done before - have you? What are your thoughts please?
We are considering acting for a Limited Company on the purchase back of shares where the Vendors wish to sell their shares back in two tranches one in this financial year and the other in the next financial year after 6th April 2014. The company is concerned that if it enters into the first buy back it may not secure the purchase of the remainder of the shares in April next year and is considering requiring the shareholders to enter into an Option Agreement so that the company can call for the purchase of the shares in April next year. The company has sufficient distributable reserves to meet the transaction - is there anything that would prevent the company from entering into such an option agreement?
Under s.769(1)(2), a share certificate does not have to be issued on allotment if the conditions of issue provide otherwise. If a company wants to dispense with share certificates and have book entry only registration, then the position seems quite clear from the above with new shares. How do you dispense with the requirement for share certificates for pre-existing shares?
Aside from the fact that the decision must be one which may be taken by a company in general meeting, is there any limitation on the use, by a sole member, of s.357 Companies Act 2006? In effect, does s.357 provide a sole member with an additional method of passing any resolution (albeit that it is termed a 'decision' which has effect as if agreed in general meeting)?
We are trying to effect a reduction of capital to return surplus shares but do not want to cancel any shares or have a share premium which can be reduced. Could the capital be reduced on a pro-rata basis so that the number stayed the same, but effectively the nominal value alters from £1 per share to 37p per share thereby returning 63p to the shareholder?
As part of a reorganisation of a group of companies carried out in the past with advice from a third party, a subsidiary of the parent company transferred all of the share capital in its own subsidiaries (which had substantial value) to its holding company for nil consideration. The only documents in that respect are the stock transfer forms and approving minutes. The transferor was subsequently dissolved. Could the transferring company make a gift to its parent company in this way? Are the transfers of the shares in the two subsidiaries valid or invalid?
If a shareholder was to gift its fully-paid shares to a company for nil consideration, you suggest that those shares would then be held the company in its own name. Assuming that no action is then taken to effect a reduction in capital in relation to those shares, what is your view as to what should happen if a third party wished to acquire the entire issued share capital of the company, given that a company holding shares in itself is not a familiar concept to many people?
Company X is a private limited company and is proposing to carry out a share buy back. It has sufficient distributable reserves but insufficient cash. X is proposing to borrow money to fund the buy back and grant security to the lender. I am aware that: 1. there is an argument that the grant of the security could amount to financial assistance (even if the actual purchase of own shares does not); 2. private companies are not prohibited by CA 2006 from giving financial assistance; 3. the directors will need consider their duties and the solvency of the company (as detailed in your note on financial assistance). What I am not entirely clear on is what the position is in terms of unlawful reduction of capital. Is it the case that providing the company does not have to make any provision in its accounts in respect of the security, there is no issue? Thank you.
In a case of limited private company, I understand that there is no need to hold an AGM unless it is trading on a regulated market. However, your definition can be read that if such company carries "rights to vote at general meetings", there is obligation to hold an AGM. Can you clarify what you mean by "rights to vote at general meetings"?
We act for an investor who is to take 15% of the shares in a private company. the company currently has 100 shares of £1. the share capital is to be increased to 20,000 shares of £50 with our client subscribing for 3000 (i.e. a £150k investment). the 2 existing shareholders have 50 x £1 shares but, post investment, they are each to have 4500 x£50 shares. Other investors will subscribe to the remainder. The existing 2 shareholders haven't yet worked what will happen to the existing 100 x £1 shares but we cant allow them to keep these as ordinary shares. is it better to have these bought back by the company or perhaps to reclassify them as B shares carrying no voting or dividend rights thus leaving the new shares as ordinary A shares. or is there a better way?
One of our clients has issued redeemable preference shares. I note the articles which relates to redeeming shares and states that the process for redeeming preference shares is no different from redeeming any other class of redeemable share. However, within the articles of association for the company in question it simply refers to them having to issue a notice to the shareholders to redeem the shares. Is it possible to simply issue the notice and redeem the shares out of distributable reserves or does the capital reduction exercise (for a private limited company) need to be complied with?
Under the changes to the rules for share buy backs which were made by the Companies Act 2006 (Amendment of Part 18) Regulations 2013 would an advance authority for a share buyback cover a situation where an EBT is buying the shares from an ex-employee, who acquired them under an employee share scheme, and the EBT is then selling the shares on to the company. Under the articles of association of the company the employee is required to offer the shares for sale on cessation of his employment?
The Companies Act 2006, under section 310, states that notice of a general meeting of a company must be sent to every member of the company and every director (unless otherwise amended by way of the company's articles of association). Where there is no such amendment in a company's articles, and a member has granted a specific power of attorney to allow another person to receives notices of general meetings on his behalf, can and does this arrangement override the above statutory requirement for all members to receive notice? I would presume that this is the case, but have not located specific authority on this point. Please can you confirm?
Can you pls direct me to a document that has a draft list of matters reserved for the board in a FTS100 company, where each matter is defined and possibly with scope and values defined for each matter reserved?
I am setting up a intergroup investing company. I am looking at the model articles and the realms of what can be provided within the articles for this company. There will be several shareholders in this company and we would like to avoid matters of that require shareholder approval. Is it possible to delegate authority within the articles that shareholder approval is not required for dividends within the company? (i.e. the board of directors alone can authorise this?) Is this something that you can delegate authority within the articles?
With a Put and Call Option Agreement that allows for a series of share buybacks, is it possible to have a general waiver of pre-emption rights on transfer applying to all the share buybacks that may be implemented under the Put and Call Option Agreement or is it necessary to produce a separate waiver each time there is a share buyback under the Option Agreement?
Could a treasury share be sold on deferred basis i.e. 1p now and 99p later? Would such shares be subject to a call / lien whilst not fully paid up or is it just the rights that apply under the share sale contract on non-payment of balance?
I'm doing a three-cornered demerger. Your practice note says that the distributing company (here, the parent of the subsidiary to be demerged) declares a dividend (using reserves at least equivalent to the book value of the subsidiary to be demerged). Should the dividend therefore be done as a dividend in specie of the shares, can it be cash which is then satisfied by a share transfer, or doesn't it matter?
I have been asked to review a buyback structure under which: I) on completion the purchasing company is required to allot an A share to the seller (this is not expressed as consideration, merely a completion obligation) II) the A share entitles the holder to anti-embarrassment payments (in the form of A dividends) on certain trigger events. Is there a risk that the structure is invalid because: - the allotment of the A share is in substance consideration for the buyback - even if it did not take the form of share rights, the anti-embarrassment payment is a form of deferred consideration? (I have never really looked at anti-embarrassment in the context of a buyback before - I usually implement this sort of partial exit through a newco structure.)
A couple of questions relating to privately owned limited (by shares)company dividends: 1. Is it possible (ignoring issues of availability of distributable profits, for this question) to declare a dividend (either as an interim or final dividend) not of a specific amount per share but of an amount yet to be calculated - for example such amount as will on the future completion of accounts result in a Net Asset Value/Shareholders' funds of £100? 2. For dividends to be free of corporation tax when payable by a wholly owned subsidiary to its holding company - and ignoring for this question anti-avoidance provisions - is the relevant date (in circumstances where the issue is a company ceasing to be a subsidiary between declaration and payment of the dividend, not becoming a subsidiary) for the test of control the date of the resolution (either directors' or shareholders' resolution for interim and final dividends respectively) or the date of payment or both?
A new client has lost some bearer shares that were issued at some stage in the past and would like to now cancel them; is this possible and if so, can you please state what procedure should be followed? Thanks.
Can you help with this please? We have a scenario where a company has issued dividends to some shareholders but not to others. My view is that the Articles must allow the payment of dividends to certain classes but not others, and in the absence of such a provision, then all shareholders will be entitled to the same dividend. What is the current position in relation to this? There does not seem to be a lot of case law on this.
In your note about Employee Shareholders you say that you have asked BIS for an update on whether it is open to the directors of any given company to seek to satisfy themselves that entry into the section 205A(1)(a) agreement by the employee could in itself constitute adequate capital contribution for the allotment of fully paid employee shareholder shares or whether it would be necessary for the company to record that the shares are paid up by way of capitalisation of distributable profits. Have you received a response from BIS in relation to this matter? Many thanks.
Following the re-registration of an unlimited company to a limited company what is the extent of the liabilities of the company to judgments entered against the company (exact amounts pending) before the re-registration took place?
I am working on a transaction which has been put together by a firm of accountants. The current proposal is that part of the consideration payable for the shares in a private company is to be satisfied by the target company transferring out some of its assets (namely property and equipment) to the sellers (individuals) who will then lease those items back to the buyer company. Whilst I'm not concerned about this from a financial assistance point of view as the transaction only involves private companies I'm concerned about this from a maintenance of capital point of view as the company's assets will be reduced considerably and the value of the assets to be transferred out will exceed the amount of distributable reserves of the target company. Normally I would expect to see the assets hived up from the target company to the buyer with a corresponding accounting entry in respect of an inter-company debt due from the buyer to the target company and then those assets transferred from Buyer to Sellers as discharge of the monies owed by the Buyer (all at market value rates). Any thoughts on the ability of a target company to transfer assets direct to the Sellers as part satisfaction of the purchase price for the shares in the target company or any other relevant considerations would be most appreciated.
I have been instructed to deal with a transfer of shares, and a discrepancy between the AR01 and the company accounts has revealed that the majority of shares in issue are only part paid - £1 shares with 50 pence paid. The transferee is acquiring the shares as a gift and needs to ensure that he will not be called upon to pay the remainder. To resolve this, I believe that we need to sub-divide the shares into 50 pence shares, half of which are fully paid, the other half not paid, and then buy back the nil paid shares. We would also sub divide the two fully paid up £1 shares. Do you agree, or is there an alternative?
What are the consequences of a failure by members of a private company to pass a special resolution to authorise an off-market purchase of the company's own shares? If there does turn out to be a special resolution, is it necessary to file a copy of this at Companies House, and would there be any consequences for failure to do so?
A private limited company wants to reduce its issued share capital through the solvency statement procedure. Prior to the capital reduction the share capital of the company is held 50:50 between two shareholders. It is agreed that one of the shareholders will have their shareholding reduced, such that following the capital reduction the shareholding will be 70:30. Is it necessary to subsequently enter into a share buyback following the capital reduction or, is it sufficient that the members of the company have signed a written resolution to the effect that the capital of the company will be reduced by x pounds and that it will be the shares owned by x shareholder which are affected. Following the reduction there will be no distribution to the shareholders as the consideration in respect of the capital reduction is non cash consideration.
I recently completed a share restructure for a company as part of an MBO. This completed at the end of February 2013. Before completion there were four shareholders, two of which had A shares and two of which had B shares. After completion of the MBO all shareholders were assigned ordinary shares. There was an agreement between the directors/shareholders (who are the same people) that the shareholders should receive dividends up to the end of February based on the profit for that year up to that date and in accordance with their shareholdings at the time. The end of the financial year was August 2013 and as such accounts were prepared/finalised etc and the figures for the dividends were finalised. The problem I know have is that I want to declare dividends on the shareholding proportions as they were before completion of the MBO and not as they stand now. Is this possible, and if so, how do I go about it? I was thinking I would simply draft a comprehensive board minute setting out the agreement between the directors/shareholders backed up with a shareholder resolution/consent. Would this be sufficient? And at what date would the dividend actually be declared? If we backdate it to before the MBO then I understand we will need to be comfortable of the Company's financial position at this time. Many thanks for your help.
What are the consequences of a subscriber's address being incorrect in the memorandum of association and the Form IN01? I understand that this cannot be rectified by filing a form with Companies House. Thank you.
In your practice note titled Redeemable Shares (http://uk.practicallaw.com/0-502-0286?q=redeemable+shares), reference is made to the apparent inconsistency between the wording in section 687(3) and 692(2) regarding the ability of a company to pay a premium on the redemption of shares out of capital. PLC states that it believes that s687(3) should be interpreted in the same way as section 692(2) which allows a company to pay a premium on the purchase of its own shares out of capital. Have you received any response from the Department of Business, Innovation and Skills in relation to this?
If a company has not allotted shares but a form SH01 is filed (in error), should, for example, the accounts or register of members refer to the allotment (because it appears on the register)? The company may be entitled to apply to remove the form but, unless and until it does, what "force" does it have and what notice should be taken of it?
A private limited company has share capital, capital redemption reserve (arising on a previous purchase of own shares) and very little distributable reserves. It is intended to reduce capital by the solvency statement route. None of the share capital will be reduced only the capital redemption reserve. The resolution will be filed at Companies House together with a form SH19 (which will reflect no change in the number of shares), are there any other filing requirements in respect of the creation of the distributable reserve by the reduction of the capital reserve?
Can a charity operate as a limited company (limited by shares) under the Company Act 2006? I am aware that a charity can operate as a company limited by guarantee but am not sure whether it can operate as a private limited company.
What is the position if you have a Shareholders Agreement (where there are only 2 shareholders) that simply provides no shareholder can transfer his shares without the consent of the other shareholder and one of the shareholders dies? Do the PR's of the deceased shareholder simply hold the shares until the surviving shareholder agrees to them being transferred to a person(s) he is agreeable to?
Board minutes for approving a reduction of capital using the solvency statement procedure 7.1 b refers to convening a meeting what is this for - these are already the minutes of a meeting occurring at that time? Is a special resolution required of shareholders of the company? What is the order of the process e.g. send out notice of meeting board meeting, solvency statement and compliance statement can all be reviewed and if agreed signed at the meeting. shareholder approval yes/no? and if so when? then SH19 and file all 4? in theory can all documents be reviewed and agreed on same day?
My firm is dealing with the estate of a deceased client (the Deceased). The Deceased ran a company in which he owned shares. The shares pass to his widow under his Will. However, it was always the wish of the Deceased that the current MD of the company should have the opportunity to buy the shares and run the company after his death. The MD cannot afford to buy the shares and has proposed a company buy-back of shares by instalments. Obviously, this cannot be done as all of the shares would need to be paid for at completion. Also, the company does not have sufficient distributable reserves or capital. Other than advising that the MD seek investment funds from a third party, is there another solution? For example, by way of an asset sale?
The scenario before me is as follows: A private limited company wishes to carry out an off market own share purchase of a shareholder’s shares (100 shares). For the purposes of this query, the total consideration that will be payable for the own share purchase will be £1,000. However, the company wishes to carry out the purchase in 10 tranches (purchasing 10 shares for £100 each time), all documented in an agreement, and conditional upon the company having sufficient distributable reserves at the time of each tranche. In this scenario, would the company need to have distributable reserves of £1,000 (being the whole value of the own share purchase) at the time of entering into the contract, or would it suffice that the Company has enough distributable reserves in order the complete each tranche (i.e. £100 for each tranche)? My initial view is the latter, on the basis that the distributable reserves of £1,000 at the time of entering into the contract, may well have depleted by the time we get to one of the tranches, and therefore, the requirement should only be to have sufficient distributable profits at the time of each tranche.
Your Practice Note, Employee shareholders (draft) states: "As there is no statutory authority permitting a company to make a bonus issue or to capitalise its reserves, the company's power to do so relies on adequate provisions in its own articles of association." Our client has Table A articles and wishes to capitalise its reserves to pay up the nominal value of shares to be issued to a non-member. Can this be authorised by an ordinary resolution of the members, or do the articles have to be amended?
Is it possible to allocate a portion of existing nominal share capital to a share premium account? For example, could you take 100 outstanding shares of £1.00 nominal value each and change them into 100 shares of £0.01 nominal value each with a premium of £0.99 each? If so, what would be the process for changing the nominal / premium split?
The update refers to "It will be necessary to check that the company’s articles of association permit the appropriation of capitalised sums to non-members", however, if share premium is to be used for the bonus issue wouldn't it only be available where the employee shareholder was already a member of the company, irrespective of what the articles said, due to the impact of the s610(3) of the Companies Act 2006 (application of share premium) and its reference to "use the share premium account to pay up new shares to be allotted to members as fully paid bonus shares". Your thoughts on the above would be much appreciated.
Is it necessary for there to be an actual employee share scheme in place for a company to make use of the Buyback Regs? Or do the words "for the purposes of an Employee Share Scheme" allow a company to purchase shares for a future employee share scheme?
I have a question about Charitable Incorporated Organisations. We are a limited company registered under the Companies House and are seeking to convert into a CIO. Is this possible? I notice on your practice note that other types of charities can covert but nothing about an already registered limited company.
I am looking to find the simplest way to arrange for an associated company ("company A") of another company ("company B") to "return" some nil paid shares in company B to company B (for nil consideration), in circumstances where both company A and company B have agreed that this should happen for structural reasons. Both company A and company A are private limited companies. As the shares are nil paid then a share buyback and a gift for nil consideration do not seem to be available. The relevant part of company B's Articles of Association is contained in the 1985 Table A Regs. This would appear to require the full forfeiture procedure to complied with (making calls etc) and does not permit company A to simply surrender the shares (even after the initial call), which both companies would prefer, as this is being done on a "friendly" basis. Is that correct and, if so, do you have any other suggestions as to how best to effect this in the simplest possible way (a capital reduction is rather over-complicated for what is trying to be achieved?
Other than winding up of the company, what is the position when there is a dispute between shareholders each owning 50% of the company (also being the only two director of the company) and where there is no shareholders' agreement in place and the articles do not provide for compulsory transfer or deadlock provisions?
Pursuant to section 692(1) and (2) If a premium is payable on shares to be bought back by a company, it must be paid out of distributable profits. Further the price to be paid for the shares will have to be disclosed to the company’s shareholders. In the scenario I’m thinking of, the company is buying back the shares for a value of more than the shares are actually worth. The motive is effectively to buy out the relevant shareholder. Is there any other provision in the companies act to be aware of which would affect the transaction, due to the fact that the price the company paid for the shares was above market value?
A company does not have enough money to buy back shares from an exiting employee (not subject to an employee share scheme). I appreciate that shares must be paid for on purchase. However, is there any issue with using the buyback contract to obliging the exiting share holder to sell the remaining shares back to the company on certain conditions (sufficient funds) being met? Also, does PLC have any relevant precedents?
We are advising a seller on a proposed share buy-back out of distributable reserves. The draft buy-back agreement presented envisages multiple completions (a number of tranches in total), with completion of each tranche subject to the company having sufficient distributable reserves. Aside from the fact the contract is conditional (so no guarantee for the seller that any of the tranches will complete), it also states that, on entering into the contract (when the first tranche will complete) the beneficial ownership of the seller for all the sale shares will be transferred to the company with full title guarantee and the seller waives all rights to dividends etc. (indefinitely). It also includes a provision which states that, until such time as the transfers for the sale shares are registered in the register of members, the seller will hold the shares registered in his name on trust for and as nominee for the company. Furthermore, the contract obliges the seller to deliver stock transfer forms for the sale shares to be held by the company provided that they shall only be dated on relevant completion date for each tranche. We are told that the transfer of the entire beneficial ownership is a pre-requisite to ensure the consideration is treated as a capital gain but are concerned that there is something not quite right with the current proposed structure. How does the suggested structure fit in with the strict requirements under the Companies Act 2006 (a breach of w
Do the deemed distribution rules apply to distributions in kind between a company and the sister company of its parent company? I understand that the rules apply as between sister subsidiaries controlled by the same parent (as per the Aveling Barford case), but would a distribution in kind at less than market value (i.e. a loan waiver) by a subsidiary with no distributable reserves to the sister company of its parent company be caught as an unlawful distribution?
Dividends: On the sale of a 50% shareholding to the ongoing shareholder and following the preparation of completion accounts and a net asset adjustment both to be dealt with post completion , the parties wish to issue any available profits relating to the previous year's trading by way of dividend to themselves on an equal basis . However, the outgoing shareholder will no longer have his shares at the point of the distribution. Can I provide in the SPA that the outgoing shareholder will receive dividend in relation to his shares up to the point of sale even though the distribution will be post sale ? They do hold different classes of shares with equal rights .
My client's accountants have recommended that my client carry out a share buyback where the consideration for the purchase if £nil. The shareholders in question are happy to proceed this way as it is part of a larger reconstruction but I have not come across a share buyback being carried out at £nil consideration. Is this even possible? I cannot see any prohibition in the CA'06. Thanks
Under a shareholders' agreement, shareholder A agrees to transfer his entire shareholding to Shareholder B on his death. However, in his will, shareholder A subsequently bequeaths the shares to a third party in contravention to the shareholders' agreement. In this instance does a shareholders' agreement take precedence over a will?
We are aware of the process under section 62 of the Industrial and Provident Society Act 1965 which allows an Industrial and Provident Society to convert to a Company Limited by Shares or Guarantee. Is there a process which allows a Company to convert to an IPS by simply passing a resolution or would this require the incorporation of an IPS and transfer of business and assets?
Why are the rights of pre-emption contained within the precedent shareholders' agreement rather than in the precedent articles of association? Are there any particular benefits of incorporating them into either document?
We have a single member company with Table A Companies Act 1985 with a quorum of two for general meetings (article 40). Does section 318 Companies Act 2006 permit a quorum for an AGM or will the articles need to be amended?
On re-registering a company limited by guarantee as an unlimited company, is it possible to change the status of the company from an unlimited guarantee company to an unlimited company with a share capital? I appreciate that, ordinarily, such a conversion cannot take place but in circumstances where the Company becomes unlimited is this possible?
Annual General Meetings: we have a client who is saying that shareholders are entitled to submit 1,000 word information requests to a company to be raised at the AGM. Is this correct and do the directors have to consider such requests ? Are there any time limits for submission of these requests ?
I'm drafting an own share off market purchase agreement between a company and its only 2 shareholders in which they will each sell 5000 shares to the company (5% each) at par for cash. Your checklist provides that the written resolution excludes those who shares are being bought back. In my case I wouldn't then have anyone to sign the written resolution. Can they sign it anyway or could I get round this by having 2 separate resolutions?
Removal of Capital redemption reserve from a private limited company's accounts. Can you assist with how to remove what is showing in the accounts for a private limited company as £4,403.00 capital redemption reserve from May 2012 and April 2013?
I am looking to issue employee shareholder shares under the new employee shareholder regime which requires the shares to be issued fully paid up, requiring the capitalisation of profits/reserves. The company I am seeking to do this for has significant losses and is balance sheet insolvent (although is able to pay debt as it falls due as other parts of the group are profitable). Is it possible to reduce the share capital, creating a capital redemption reserve, and capitalise this in order to issue bonus shares? It appears that the net position would require the realised losses to be netted off against the realised profits (which the cap reserve would be treated as) but I'm not clear if this is actually the case. Thanks
A husband and wife own 50% each of a private ltd company. They ultimately want to leave the company to their son but they are worried about what would happen if they both died on a Wednesday and employees needed paid on the Friday. Basically, their concern is that the practical jobs such as the day to day running of the company would be problematic should they die at the same time. They want to include a clause in their will that their personal reps can run the company straight away without the need to get a grant. I have researched this and discovered that if they have adopted the model articles then personal representatives themselves can appoint a director of the Ltd company and this power comes in on death if they are named as the personal reps in the will. Their articles of association are very similar to the Model Articles but the section relating to appointment of directions states that 'in any case where, as a result of death or bankruptcy, the company has no members and no directors, the transmittee(s) of the last member to have died or to have a bankruptcy order made against him shall have the right by notice in writing to appoint a person (including a transmittee who is a natural person) who is willing to act and is permitted to do so, to be a director.' My question is, what is a transmittee? Is a transmittee a personal representative? If not, what sort of clause would be effective in the will to ensure that the running of the company continues without t
In the below link you advised that Capital Reduction could be utilised as an alternative to a share buy back. Are you able to provide a comparison on the two procedures in respect of the pros and cons of each method?
We have a client who is going to let their largest shareholder have a representation on its board as a non-exec director. the fees payable is cash and shares. Can the fees be directed so that it is payable to the shareholder instead of the individual who will be appointed a director? I suspect it is not possible for lack of consideration on the shareholder's part.
I was instructed on a share buy-back which was effected by way of distributable reserves. The transaction successfully completed a few months ago. In essence, the anticipated profits on the deal were taken into account when a dividend was declared moving money up from a subsidiary to the holding company to increase its distributable reserves. It may now transpire that the distributable reserves were not in fact available. I should be grateful if you would please advise me as to the position that the company may now find itself if the distributable reserves were not available. Any information at all would be gratefully received.
A shareholder being a family trust is requesting a company pay the dividend to which it is entitled directly to the beneficiaries of the trust. As the beneficiaries are not shareholders I intend the company declare the dividend and ask the trustees to direct them in writing to pay the sum due directly to the beneficiaries and to indemnify the company and directors for any liability arising from acting in accordance with their instructions. Presumably this will be sufficient for the directors to have complied with payment of dividends to members only?
Company incorporated under 1985 Act, wants to do something expressly prohibited by articles (issue new shares without offering first to existing shareholders) – can the company authorise this as a one-off by an SR (there is no express power in the articles to do this), or is there no alternative to changing the articles?
I have seen your response to the question "Share buybacks: is a stock transfer form required where repurchased shares are to be held in treasury?" and I agree that there is logic for using a stock transfer form when transferring INTO treasury. Do you agree that a stock transfer form is required when shares are either sold (to a third party) or transferred (for the purposes of an employee share scheme) OUT OF treasury?
A reduction of share capital takes effect on registration of the solvency statement, members' resolution and statement of capital by Companies House. Is the issued share capital automatically reduced with the filing of these documents at Companies House, or are there any subsequent procedures to reduce the issued share capital?
Under section 29C of the Industrial and Provident Societies Act 1965, it says that an Industrial and Provident Society (IPS) can execute deeds by a ‘secretary and a member of its committee’. What is the difference between a ‘member of its committee’ and a ‘director’ of an IPS? If a deed was executed in the wrong capacity, is there any provision for IPS’s which means the company will still be bound, i.e. that mirrors s40 of the Companies Act 2006 provisions.
If a special resolution creating a class of preference shares (in a private limited company) does not expressly state that the preference shares will be non-voting (except in the case of the dividend being in arrears), would it follow then that the preference shares will have full voting rights pari passu with the existing class of ordinary shares?
Where there are two shareholders holding 50% of the shares in a private limited company, how can an effective resolution be passed to buy back on tranche of 50% as that shareholder cannot vote on the resolution?
We are acting for a company adopting 1985 Model A articles. One of the shareholders currently has shares that have not been paid for. What is the process for forfeiting the shares and what filings would subsequently need to be made at companies house? I think there are two possible ways to forfeit the shares: one way is through the Companies Act s.641 which would require a Special Resolution and the other way is to use the articles which sets out a process whereby the directors themselves can implement a forfeiture. Our client does not want to have to hold a shareholder meeting if possible.
In a situation where shareholders wish to remove a director but also wish to effect a number of matters via a general meeting (change of articles etc), what is the relationship between the provisions relating specifically to the removal of directors under s168-9 CA 2006 and general requisitions of meetings by members under s303? I appreciate that the s168-9 procedure involves special notice of 28 days, but the s303 procedure allows the board 21 days to call the meeting and then the notice period of 21 days itself (whether called by the board or members) so the director concerned would not be prejudiced as far as time limits are concerned.
A client has incorporated a company with 100,000 ordinary shares of £1. However, when he incorporated the company, he mistakenly thought that he was simply detailing the maximum authorised share capital, and not the issued share capital. The shares have therefore not been paid for, and there is no provision in the articles of nil paid shares). What is the procedure for rectifying a mistake and cancelling these shares, save for, say, £100 ordinary shares of £1?
Practice note on demergers says in relation to a dividend in specie of shares from a parent company to its shareholder: " Any unrealised profit or loss actually shown in the parent's books in relation to the subsidiary is treated as realised on the demerger (section 846, CA 2006).". Paragraph of the ICAEW technical release 02/10 states that "a dividend in kind from a subsidiary is an unrealised profit in the hands of the parent (even where there is a cash alternative) unless the asset distributed meets the definition of qualifying consideration. However, if the non-cash asset is distributed by the parent then, following section 846, that unrealised profit would be treated by the parent as a realised profit for the purpose of that onward distribution, provided that the profit was recorded in the relevant accounts." I think this means that if the parent transfers shares to its shareholder (also a company) by way of dividend in specie, the shareholder must treat this as an unrealised profit. However, I think the shareholder is entitled to treat the distribution to it as a realised profit (and can therefore count it when calculating distributable profits) if it makes an onward distribution to its own shareholder. My question is: the explanatory notes to the Companies Act possibly suggest that section 846 only applies to situations when the shares have been revalue by a parent (thereby resulting in an unrealised profit in the accounts) and would not therefore allow a sh
My query concerns ordinary shares to which voting rights are attached. The shares are currently held on trust and as a result the trustees are unable to exercise the voting rights attached to these shares at general meetings. Are these shares still considered shares that carry voting rights for the purposes of section 303(2)(a) of the Companies Act 2006 even though such rights are not currently exercisable by the trustees.
If there were pre-emption rights within the Articles of a company, is there any reason why a shareholder to which the pre-emption rights apply could not hold shares on trust for a beneficiary who would not be offered the shares by virtue of the pre-emption rights? Any guidance PLC has would be appreciated.
I have been asked to cancel redeemable preference shares which are treated as a creditor under FRS 25 and not shown as share capital on the balance sheet. Do I treat this as share capital and file solvency statement documentation or is the reduction simply an accounting transaction? Secondly, can the reduction be for nil consideration? The company does not have profits to cover the par value of the total amount. They were previously redeeming a small amount each year.
Under a s110 Insolvency Act 1986 quoted company merger between two companies where the aquiree entity has two share classes, which (if any) of the following resolutions would be deemed to affect rights attaching to shares such that a requirement to hold separate class meetings of the acquiree company was required: 1. Approval of a merger whereby the acquiree transfers all assets to an acquirer as consideration for the issue of new shares in the acquirer to shareholders of the acquire: and 2. The winding up of the acquiree company. I think that no class meetings are required on the basis that neither of these proposals affects the rights attaching to a particular acquiree share class but I would be happy to hear your thoughts.
Is it necessary to amend these Articles of Association of a company where the shareholders pass a resolution under section 551 to create a second class of shares if the resolution sets out the rights of those shares. In other words, is it sufficient that the rights of the new class of shares are set out in the resolution only without amending the Articles to set out the rights of the new class of shares in the Articles?
Shouldn't article 15 say something like: 15 Subject to the Act but without prejudice to any other provision of these Articles, the Company may purchase its own shares: 15.1 out of capital in accordance with Chapter 5 of the Act; or 15.2 with cash up to any amount in a financial year not exceeding the lower of: (i) £15,000; and (ii) the value of 5% of the Company's share capital. Otherwise it could be read as a restriction on buybacks made which don't use the new deregulated mechanism?
If a resolution is passed by members at a general meeting, based on information which, after the meeting and approvals, turns out to be incorrect; does this invalidate the resolution? How would you rectify it?
We are in the process of preparing Articles of Association and a Shareholders Agreement for a client. The client's accountant have asked whether redeemable shares (to be set up in a separate class of B shares) which will be held by several different shareholders can be repaid to each individual at separate times or whether they have to be paid proportionately.
Given that a buyback is not a transfer as such, is it absolutely necessary to obtain either the prior written consent of all the members or a pre-emption rights waiver from all members where the articles provide that 'shares may be transferred to any other person with the prior written consent of all the other members' and where all other transfers must go through a fairly standard pre-emption rights procedure. There is no pre-emption carve out for buybacks and in this case getting the signature of 100% of the shareholders in time may prove difficult.
We have a PLC incorporated under normal model articles in accordance with the 2006 Act. When are they required to hold their Annual General Meetings i.e. is there a time frame within which they must be held?
We're comfortable that no stock transfer form is needed if the shares to be bought back are being cancelled. But do you think an STF would be required where the shares to be bought back are to be held in treasury as that looks more like a transfer - the company becomes registered as a member?
Where a company reduces its share capital by way of a solvency statement in order to make a payment to shareholders; once the reduction has been lodged and registered at companies house, is there a required/recommended timescale in relation to the payment being made to the shareholders? In most cases the return would be paid out as a dividend which is at the company’s discretion/related provisions in the Articles, would it simply be a case of payment being made at the company’s discretion?
If a private limited company is reducing its share capital to repay shareholders (i.e. not creating a reserve, is there any statutory or other provision requiring the payment to be made within a prescribed time period once the resolution has been passed?
I have a company with 1985 Act articles incorporating Table A that wishes to issue nil paid shares as an employee incentive. I can amend the articles to allow payment of dividends on the number of shares held rather than the amount paid up on them, but if I do so can the company then issue dividends on the nil paid shares as it sees fit or are there any other restrictions that should be taken into consideration?
Is it possible for a shareholder to grant an option to a company (in which he owns shares) to buy back his shares in certain circumstances, e.g. upon a shareholder leaving employment with a company within a certain period of time from acquiring the shares? I would be grateful for any guidance on this. I appreciate that the articles of association of a company will need to be checked to see whether buy back of shares is not prohibited, etc.
Please can you confirm if an unlimited company with the following articles can reduce its capital redemption reserve by special resolution: • standalone articles of association that do not incorporate any regulations or articles set out in any statute, or in any statutory instrument or other subordinate legislation made under any statute concerning companies; • an interpretation clause stating that "Unless the context requires otherwise, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the Company" - the articles were adopted on 21 March 2012; • "The company may by special resolution reduce its share capital and any share premium account in any way". This is the same power as included in Table E, Companies Act 1985. Our view is that an unlimited company should be permitted to reduce its capital redemption reserve by special resolution (limited companies are permitted to do so under s.641 Companies Act 2006) but that it may be necessary to amend the company's articles to include the express power to reduce its capital redemption reserve. We have not, however, been able to find any specific case law or commentary to support this view and it seems odd that Table E, Companies Act 1985 did not include reference to capital redemption reserve. We note that pursuant to s.733(6) Companies Act 2006, the provisions of the Companies Acts relating to
In relation to the question of whether a company is "authorised to [buyback with cash] by its articles" under s692(1)(b) CA2006, can I assume that Regulation 35 of Table A 1985 is sufficient authorisation (private company may make a payment 'otherwise than out of distributable profits or the proceeds of a fresh issue')?
Do treasury shares of a PLC on the main market lose their listing and admission to trading so that when they are used as a source for employee share scheme, does one need to re-apply for admission to listing and trading? Also, does a company need to apply for admission to listing each time shares are allotted or just for each class of share? Thank you
I am aware that any provision in a company's articles of association is void in as far as it has the effect of excluding the right to demand a poll at a general meeting (section 321 of the Companies Act 2006). Can this right be excluded between shareholders in a shareholders' agreement?
I am dealing with the purchase of own shares by a private company from distributable profits. The shares are being transferred in tranches over a number of years and are being paid for in cash when the shares are transferred. Is it sufficient for the shareholders to approve the contract and its terms now or are they required to approve its terms prior to any future buy back? I appreciate that the Company may not be in a position to comply with the terms of the contract if sufficient distributable reserves are not available when the time comes for the shares to be bought back.
Where an employee is subject to good leaver/bad leaver in respect of shares that he/she holds in his employer company, in the absence of any provision to the contrary, presumably the employee can sell those shares to a third party (subject to any pre-emption rights) before he becomes a bad leaver e.g. before he choses to resign. Do you have any provisions for articles of association that would prevent this?
How does a topco company buy back shares with distributable profits when all profits are held by the operating company lower down in the structure? Can dividends be made through the structure to the topco?
We are intending to strike off a subsidiary and are currently in the process of cleaning up the balance sheet before we do. The company is owned by three shareholders holding 1, 45 and 45 shares respectively. The company is owed a debt which it in turn owes to one of its shareholders that holds 45 shares. We are looking to re-assign the debt to this shareholder. Please can you let me know the easiest way to do this? Would it be board minutes approving the re-assignment and deed of novation? Could we do this by dividend in specie given that we need to dividend up to only one of the three shareholders?
We act for a company that has no distributable reserves (and has realised losses) but wishes to transfer a lease by way of dividend in specie. As I understand it, under section 845 the company will need distributable profits equal to the book value of the lease, and under section 846 the revaluation reserve can be treated (for this purpose only) as a realised profit. The revaluation reserve in the last accounts is less than the book value of the lease but if interim accounts were prepared now the revaluation reserve would exceed the book value of the lease. However, presumably the revaluation reserve will need to be at least equal to the value of the losses (to extinguish the losses) plus the book value of the lease (to comply with s845)? Is that correct? Also, is it permissible to use revaluation reserve to 'increase' distributable reserves even from a negative starting point? ICAEW Tech Release 02/10 on Realised Profits at para 2.9D refers to this in context of section 845 CA06 but not section 846. Finally, am I right in thinking that interim accounts will be needed as 'relevant accounts', but not a formal valuation (although this would obviously assist the directors in showing that the values in the interim accounts are fair and reasonable, and that they have complied with their duties). I realise that you cannot give specific advice but any general guidance you can give would be much appreciated.
Following the amendment made to Part 18 of the Companies Act 2006 in April this year, I have noted that only an ordinary resolution is now required for an off-market buyback of shares in a private company (s.649) (previously a special resolution was required). Will a private company partaking in an off-market buyback of shares, using only an ordinary resolution have to file any documents at Companies House? What are the filing requirements for this situation? Many thanks in advance.
Hello I was hoping that someone may be able to help me with something I am looking in to. It concerns Article 33 of the Model Articles, which provides that: 1.1 All dividends or other sums which are— 1.1.1 payable in respect of Shares, and 1.1.2 unclaimed after having been declared or become payable, may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed. 1.2 The payment of any such dividend or other sum into a separate account does not make the Company a trustee in respect of it. 1.3 If— 1.3.1 twelve years have passed from the date on which a dividend or other sum became due for payment, and 1.3.2 the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the Company. My question regards this reference to 12 years. As far as I can see from my research, 12 years is the usual time limit for returning unclaimed dividends but I can't see any authority for this in the CA 2006. I was wondering if someone with their expertise could advise me if this 12 years is just the 'norm' or whether there is a statutory basis for it? If not, could it be extended or reduced for example?
If notice of a shareholders' general meeting of a private company is given and there is, before the date of the meeting, a change in the numbers of shares held by the existing shareholders on a poll is it the number of shares registered as held at the date of the notice or the date of the resolution that are taken into account?
The directors of new client which has 2 classes of shares - ordinary and A ordinary - have issued A ordinary shares without the necessary members' authority to allot. I am preparing a ratifying resolution. Can you confirm that the ratifying resolution should be circulated to all of the current shareholders, i.e. including the ones who received shares allotted without authority?
Your note states "Increasingly companies are getting around the shareholder vote by failing to declare a final dividend and paying a series of interim dividends instead." Is it therefore the case that the directors may declare an interim dividend, subject to their being distributable profits, and this need not be declared by the shareholders after year end? I.e. directors pay £1m in dividends, shareholders need not declare the same £1m? Thanks
If a company's majority shareholder is a corporate entity, i.e. a company, is it enough that a director from that company attends the meeting or does the majority shareholder need to appoint a corporate representative to act on its behalf at the general meeting?
I refer to the recent amendment introduced by the Buy Back Regulations pursuant to which a company may purchase its own shares otherwise than out of distributable reserves under the de minimis cash exemption. In brief, my question relates to the authorisation required under the company's articles of association. I note that the practice note (mirroring the legislation) provides that "a private limited company may now, if authorised to do so by its articles, purchase...". Does the company need express provision in its articles to use the de minimis exemption or, as is the case with a buy back out of reserves under the 2006 Act, is the absence of a prohibition sufficient. Finally, in the present case, the company has adopted articles under the 1985 Act which expressly permit the purchase of own shares “whether out of distributable reserves or otherwise”. Is this express permission likely to be sufficient to allow a purchase under the de minimis exemption or are new articles likely to be required?
Where consent is required by the shareholders of a private limited company for the sale of land does the contract have to be available in advance of an EGM for inspection by the shareholders and if not how much detail of the contract needs to be in the resolution?
A public company which is unlisted has changed from having 2 members (one which was a nominee shareholder) to a single member company as the requirement to have 2 members was removed from Companies Act 2006. However, the Articles of Association were not amended (there is no requirement to have 2 members). However, in relation to AGMs or GM the articles of association state that it requires 2 persons entitled to vote upon the business being a proxy or corporate representative shall be a quorum. Does this still apply if the company is now a single member company in accordance with s318(1) or do the articles need to be followed and 2 proxies have to be appointed? I look forward to your response.
Is there a statutory or common law derived minimum quorum for a board meeting of a company limited by guarantee which has two directors? What was the position under the Companies Act 1985 and has this changed with the coming into force of the Companies Act 2006?
I am working on a share buyback transaction and wanted some clarification on The Buyback Regulations 2013 which introduced a new method of funding a share buyback. I understand that a private limited company may now, if authorised to do so by its articles, purchase its own shares with cash up to an amount in a financial year not exceeding the lower of; £15,000 or the value of 5% of its share capital. Please kindly confirm whether this method of funding is available where the total transaction will be higher than £15,000? Is our client able to use this method and then pay out the remainder of monies from the distributable profits? Can any procedure be used in relation to the share buyback or is the new method of funding only available to stand alone transactions less than £15,000?
We act for a parent company which proposes to write off a debt owed to it by its wholly owned subsidiary. The main purpose behind this is to boost the reserves of the subsidiary prior of the subsidiary making a dividend in specie of properties to the holding company. Prior to the dividend there will also have been a capital reduction to turn the share premium account into distributable reserves. I am aware of the requirements and procedures for the capital reduction and the dividend in specie but is there any procedure to be undertaken in relation to the write off ( eg does the issue have to be put to members) or can this be done by a decision of the directors?
According to s630 of the Companies Act, rights attaching to a class of shares may be changed provided the requirements are met. Can rights be changed to some only shares in a class and be redesignated a different class with different rights? E.g.: a company with 13 ordinary shares allotted, I want to make 2 of those ordinary shares only (held by one member), non-voting shares, could this be done by changing the rights attaching to those 2 shares only, with the consent of all members?
If a private limited company with one class of share with full rights to voting, capital and distributions changes to having two classes of share with the new class of share having rights to dividend only, does the company have to include the specific details of the rights attached to each class of share in the Articles of Association in order for them to be enforceable? If the rights attached to the share classes are not included in the Articles are the shares regarded as pari passu?
I am currently dealing with a reorganisation of group companies. I am striking off one of the companies but note that it has a reserve made up of 'retained earnings'. Would I need to follow the same process to reduce / cancel the reserve as I would a capital reserve account (i.e solvency statements etc) in order to create distributable reserves and thus declare a dividend to the sole shareholder?
On the death of a shareholder the shares pass automatically to his personal representative. But what rights, if any, does an executor have before probate has been granted? Can they vote? Can they appoint a proxy? Also can a company register the PR as a member before probate has been granted?
A private company limited by shares and incorporated in the UK (UKCO) has only two existing shareholders and ordinary shares. Can each of UKCO's two existing shareholders pass a written resolution for UKCO to buyback and cancel each of their shares under a contingent purchase contract (section 694(3) Companies Act 2006) on the condition that new shareholders are first issued and allotted shares in UKCO (the "Effective Time" will follow the entry of the new shareholders into UKCO's register of members)?
I am instructed in relation to a company purchase of own shares. I am aware that the purchase price needs to be settled in cash on completion of the buyback. The buyback will be out of distributable reserves. The selling shareholder owes the company money on his directors' loan account - do you see any issue with the buyback agreement providing for a proportion of the purchase price to be settled by discharge of the outstanding loan account / applied by the company (at the vendor's direction) in repayment of the loan, rather than the company physically paying the cash over to the shareholder and the shareholder being under an obligation to immediately pay that cash back to the company in repayment of his loan? Also, the company has agreed that the shareholder can keep a company vehicle used by him upon him exiting as a shareholder, director and employee. This is effectively being gifted but I am wondering whether it should instead perhaps be sold at at least book value so that it is not seen as forming non-cash consideration for the buy back with the book value being added to the amount of the share buy back price and this amount then being paid to the company for the vehicle as a separate transaction immediately following the buy back. Again, is there any need for a physical movement of cash or can we simply provide that the selling shareholder perhaps directs that the company retain £x of the buy back price to satisfy the vehicle purchase price (in the same way
As a result of The Companies Act 2006 (Amendment of Part 18) Regulations 2013 can a company buy back shares from cash if their Articles of Association authorise the Company to 'make a payment in respect of the redemption or purchase of any of its own shares as authorised by these articles otherwise than out of distributable profits of the Company or the proceeds of a fresh issue of shares.' These Articles date before the amendment.
Is the fact that a shareholder is referred to as nominee for the majority shareholder on a stock transfer form and board minute conclusive of its status as a nominee shareholder or is a trust or nominee arrangement/document required? We have a situation where a shareholder with one share is trying to argue that the one share was held as nominee and it relies on a reference to it as 'nominee' in a stock transfer form, however, we believe that it is common practice for a minority shareholder to be referred to as nominee but not in the strict sense of the word.
Where a private company has undertaken a capital reduction using the solvency statement procedure and the resolution states that the capital will be repaid to the shareholders upon registration at Companies House, do all the shareholders have to be paid back immediately and at the same time? I cannot find anything regarding process following registration.
My question relates to this paragraph: "The 2006 Act provides that any amendment to, or insertion of, a variation of class rights provision in the articles is to be treated as a variation of those rights (sections 630(5) and 631(5)). Such an amendment would require the variation of class rights procedure (see below) to be followed in addition to the sanction of a special resolution under section 21 or any more restrictive requirements as are set out in the articles. There are concerns about the implications of section 22 (Entrenched provisions of the articles) on the insertion of a variation of class rights provision. For further details see Entrenchment below." My question is - if a provision is added to a company's articles which provides for certain shares to automatically be converted in to a different class of shares (with different dividend, voting and capital rights) on the occurrence of a trigger event, does form SH10 have to be filed at Companies House at the date the provision is added to the articles (because of S630(5) CA 2006) as well as on the date on which the conversion takes place?
What are the approval requirements in the event that a company wishes to appoint a representative to attend an extraordinary / annual general meeting of its wholly owned subsidiary? Does such an appointment require full board approval of the parent or just 2 directors? Will this vary depending upon the nature of the matters to be approved at the meeting?
As I understand it, a [private company limited by shares] incorporated prior to 1 October 2009 which adopted Table A, would still have Table A articles, is this correct? And if so, can you tell me what the authority is for Table A still applying, given that the old Companies Act (and presumably Table A) has been revoked?
My company is a small company where all the directors are shareholders with equal shareholding. We recently held an AGM, where several matters outside the ordinary business of an AGM were discussed and without prior notice of it. These decisions were reached unanimously. What weight do they carry in this light. Please use 1985 CA to advise.
What is the effect, if any, of typographical errors in a company's articles of association? For example, if the articles state that the company was incorporated on a certain date, but it was in fact incorporated two days later (or earlier)?
In your article entitled "Quorum requirements: comparison between the Companies Acts 2006 and 1985", you state that "in the case of single member companies, one qualifying person present at a meeting is a quorum". Please could you clarify whether the meeting that you refer to is an AGM or an EGM. In addition, if the meeting referred to is an AGM, can the meeting be called by a single Director?
I have a question regarding companies limited by guarantee (CLG). One of my clients is interested in incorporation a CLG however he has indicated that the member does not wish to have his name shown on the Register of Members. Is it possible for a member to request that another persons name be entered in to the Register in a nominee capacity? Will a declaration of trust suffice in this case?
Our company used to be registered as a plc up until it became a private company in 2006 via a scheme of arrangement. There are a large number of dividends that were declared before 2006 that have not been cashed (payment was made by cheque), despite efforts being made to track down the shareholder. Some of the dividends were declared over 12 years ago. A large number of dividend payments made as part of the scheme of arrangement in 2006 have also been uncashed. I understand that after 12 years the company is able to declare the dividend void and it becomes owner of such money. Up until the 12 year period the company is usually also permitted to invest such funds as it so fits. My question is though - does the 2006 scheme of arrangement alter the position described above?
In circumstances where a company has undertaken participation in disclosable tax schemes which are being challenged by HMRC and has been informed by the tax scheme provider that they have advice that the chances of success of the challenge by HMRC are unlikely and that they do not need to provide for it in their accounts. Would the directors be entitled to view the claim remote enough to not consider the potential claim in determining whether or not to make a distribution to shareholders. Does the fact that the legal advice as regards chances of success is not personal to them risk them being sanctioned for putting assets beyond creditors should the HMRC claim be successful?
A company we are acting for entered into a conditional/contingent share buy back contract a few months ago. The contract was approved by the members. The company has since passed a resolution sub-dividing the shares. Does the sub-division amount to a variation of the original contract which requires approval in accordance with s697 CA 2006? None of the other terms of the contract have been changed.
As treasury shares can now be held by private companies, should the paragraph under the heading "statutory pre-emption rights" in practice note, Treasury shares be updated to also refer to section 567 CA 2006? i.e. an exclusion of statutory pre-emption provision in the articles pursuant to s.567 CA 2006 can also be drafted to cover the sale of shares out of treasury as well as the allotment of new shares. Also, do you think that any such provision in the articles should expressly refer to the sale of treasury shares or is reference to "equity securities" as in section 560 CA 2006 sufficient? ie is the wording below in caps necessary? "In accordance with section 567(1) of the CA 2006, sections 561 and 562 of the CA 2006 shall not apply to an allotment of equity securities (within the meaning of section 560 of CA 2006) by the Company OR, FOR THE AVOIDANCE OF DOUBT, TO A SALE OF ORDINARY SHARES IN THE COMPANY THAT IMMEDIATELY BEFORE THE SALE WERE HELD BY THE COMPANY AS TREASURY SHARES."
We have a company who wishes to buy back shares. The Seller wants a potential deferred payment calculated by reference to the dividends it would have received had it remained a shareholder. s691(2) CA2006 would prevent this so we have considered either a separate redeemable non-voting class of share being issued to the seller entitling it solely to dividends or alternatively, the remaining shareholders personally agreeing to pay this amount to the seller (on the basis that they will have the benefit of the increased dividend in any event) although the tax position will need to be considered. We wondered though if there was any other methodology you had come across.
With regard to a reduction of share capital for a private limited company, using the solvency statement procedure, can I please clarify one point in relation to section 641 (2) of the Companies Act 2006? If a private limited company has an issued share capital of, say, 100 ordinary shares (and has no other class of share), and wishes to reduce that figure from 100 to 50 ordinary shares, what role does 641 (2) play, if any? My understanding is that it would not as the example described above relates to ordinary shares only. Thanks.
The company has previously issued redeemable preference shares to an affiliate. Those were issued at a premium, which is partly-paid, to the nominal value of each share. Is it possible and what are the requirements for partial repayment of premium paid up on the redeemable preference shares (without cancelling / redeeming the shares)?
I would be most grateful if you would provide your thoughts on what the situation would be if: (1) on applying to register a (2006 Act) company as a company limited by guarantee, the applicant failed to provide a memorandum of association; and (2) Companies House did not spot this omission and proceeded to incorporate the Company. I understand that Companies House would not accept a new replacement memorandum. Please could you provide your thoughts on whether (1) the established Company in question would be validly incorporated and would not need to take any further action as it would have a certificate of registration; or if (2) the company would need to take action to rectify the situation (for example by incorporating a new company to which it could transfer the name and assets of the original company)? Many thanks for your help.
We have a company incorporated under the 1985 to 1989, Tables A to F, as amended and would like to take advantage of the relaxation in CA 2006. Please can you provide procedure and resolution to adopt this?
Commercial agreement has been reached where shares reflecting 10% in the capital of a company are to be issued to a group of individuals. These shares will be a different class (B Shares) to the other 90% of shares in the capital of the company (A Shares). They will rank pari passu in all respects, save that the first £60,000 of any dividends declared will be paid solely across the B Shares, the first 300k arising from any sale of the company (or its assets) will be paid to the holders of the B Shares (with any remaining funds divided proportionately amongst the A Shares and B Shares. Is it possible to put this in place? Would it all be contained in the articles of association?
I am preparing a dividend in specie between subsidiary and holding company in respect of a debt owed to the subsidiary. My question is as well as normal resolution and board minutes re dividend in specie, should a deed of novation be entered into to formally transfer the debt owed?
If a client wishes to reclassify some existing shares from A to B with both classes already in existence, do we have to file a resolution at Companies House now we no longer need to have issued share capital?
A subsidiary company is proposing to transfer various assets to its parent by a dividend in specie. One of the assets to be transferred is intellectual property rights (IPR) which currently do not have a book value (they consist of copyright in technical drawings and technical know how). Do you consider that it would be necessary to attribute a value to the IPR (a) on the balance sheet of the subsidiary before declaring the dividend and/or (b) on the balance sheet of the parent on receipt of the dividend?
I am looking at a proposed Dividend in Specie by a Holding Company (Topco) which has a wholly owned Subsidiary (Subsidiary) which in turn has a wholly owned subsidiary (Sub-Subsidiary). Can the assets distributed under the Dividend in Specie by Topco be the shares in Sub-Subsidiary or do the assets have to be owned directly by Topco when the dividend is declared?
There is a group of private companies which comprises as follows: company A (not a UK company) wholly owns company B (incorporated in England and Wales), company B wholly owns company C (incorporated in England and Wales), company C wholly owns company D (incorporated in England and Wales) and company D wholly owns company E (incorporated in England and Wales). Company A owes company E, a loan in the region of £2million (the “Loan”). The proposal is to declare dividends ‘up the chain’ from company E to company A so that ultimately company A can then repay the/part of the Loan. The question is whether it is possible for companies E, D, C and B to declare cash dividends but to not transfer cash to their immediate parent, and instead have letters of direction (or a composite deed in place between the companies) in place which ultimately direct that E set off the amount equivalent to the proposed dividend received by A against the amount under the Loan (on the basis that E would declare a final dividend to D, who would direct E to pay such amount to C, on D’s behalf, to satisfy the proposed dividend by D to C, with C then directing D to pay such amount to B to satisfy its proposed dividend to B etc. and so forth up the chain). When it gets to company B declaring a dividend to company A, company A would direct company B to direct company C to direct company D to direct company E to utilise that amount that was to ultimately be paid by E to A (in accordance wi
Is it possible to include a provision in a Company's articles that prohibits one class of shares from selling their shares to anyone else other than a shareholder from another class (i.e. they can't sell to a third party and have to sell to another existing shareholder of the Company)?
I would be grateful if you could help us with a query relating to industrial and provident societies. Where a company converts to an industrial and provident society under the Industrial and Provident Societies Act 1965, are all of the company's contracts and leases automatically assigned to the new entity (i.e. by operation of law)? Or does the company need to assign its contracts and leases in writing to the new IPS? Section 53(7) of the 1965 Act states that registration of a company as an IPS does not affect existing rights or claims against the company but does not specifically deal with the point. I have checked the various other statutes governing IPA's and the FSA's (the registering authority for IPSs) website but could not find anything relevant. If there is no authority on this point, please could you confirm what the fall back position is?
I have a client who is by far the major shareholder in a trading company. He intends to provide shares for key staff as follows. First, he will swap his shares in the trading company for A ordinary shares in a newco holding company. He will get 49% of the equity in newco. His shares will be non-dilutable. The shares will also carry certain privileges in terms of voting and other matters. The managers, for their efforts to date, will swap their existing nominal shareholding (and some share options) in the trading company for B ordinary shares. They will get 51% of the equity in newco. The managers class rights will be more limited, but they will be permitted to incentivise other new entrants by diluting their own equity i.e. diluting their own B ordinary shares. It is central to my role to get the drafting of the class rights correct. Can you provide any assistance on how I would go about recording the different equity value as between the A ordinary and the B ordinary shares? For example, it does not really matter if newco issues 100A ordinary or 490A Ordinary, so long as it is clear, that these shares will always represent, in aggregate, 49% of the overall equity of the company. I was not sure if you have some example drafting (or any ideas where to look). I imagine this is all best placed in the articles. But I am not sure I can find articles on PLC, which specifically cater for dilutable and non-dilutable shares, and stating what their respective equity values a
Section 29/30 of the CA06 requires a special resolution to be filed at Companies House, and section 283 defines a special resolution as resolution which requires at least 75%. My question is whether you have to file a resolution at Companies House which is required in your articles to be passed as a special resolution, but not under the CA06. I think that the CA06 requires this but on speaking with CH they say they only require copies of special resolutions that are required to be passed as special resolution under the CA.
We are advising a company that has issued A shares and B shares. The A shares were issued at a premium. Is it possible to carry out a reduction of share capital whereby: (a) the share premium account is reduced (with such amount being returned to the A shareholders) and (b) all of the A shares of the company are cancelled and the amount of such shares returned to the A shareholders. If this is possible, there will be an amount that remains credited to the share premium account. How would you show this amount in Form SH19 when filed given that the A shares no longer exist and it is those shares which previously carried the share premium?
I have read your Practice note, Treasury shares, and have the following query. We are an AIM listed PLC, and have recently been involved in an asset and share sale (as the seller) to a related party who is a majority shareholder. Part of the consideration payable to us is in the form of us conducting a share buy-back of all the shares of this shareholder, and retaining the proceeds of this buyback. The shares themselves will be held in treasury. In this scenario, do we require to complete an SH03 form and file at Companies House (as this is not the "conventional" share buy-back).
If the current auditors of a private company resign with effect from a specific date, do the company's new auditors need to be appointed with effect from that date or is a period of 3 weeks between the resignation and the appointment acceptable ?
Can you please advise whether I would be able to reduce the share capital of a private company with the following balance sheet. Would I only be able to reduce it by £4.5m as otherwise it would be insolvent. cash at bank 4.5m NET ASSETS: 4.5m share capital 10m Profit and loss (5.5m) shareholder funds: 4.5m
We have lost contact with a shareholder who previously verbally agreed to transfer their subscriber share but who has not signed a stock transfer form. The company in which the share is held contains little value but to wind it up would also require approval and signature by the current shareholders. Do you have any guidance that deals with the situation in which a company loses contact with a shareholder or on the implications of registering the transfer or winding up the company without their signature? Thank you.
Company X has 1985 memorandum and articles of association. The memorandum refers to an authorised share capital. Following the 2006 Act, that reference to an authorised capital is deemed to be part of the articles and can be altered by ordinary resolution. However, when I file the resolution with Companies House, do I need to file a copy of the amended memorandum (showing the amended capital) or the articles (which haven't changed; they don't mention the capital) or both or neither?
A UK company has a subsidiary overseas. All of the directors of both the UK parent and the overseas subsidiary are based in the UK (and are the same directors). If the directors are making business decisions etc in relation to the overseas company from within the UK (i.e. at the UK parent company's office), could that be regarded as a place of business for the purposes of the Overseas Companies Regulations?
We have a client family company where one of the two shareholders wishes to retire and dispose of his shares (approx 48% of share capital). Their accountants have proposed that, although there are sufficient distributable reserves shown in the latest accounts, there is insufficient cash to finance all of the proposed buy back by the company. They have therefore suggested that two properties which are superfluous to the business be transferred to the outgoing shareholder in specie in satisfaction of the payment for such number of shares as equals the value of the properties. Clearly, this is not a payment 'in cash' but our query is whether this is a legal alternative under the CA 2006, or indeed if there is any other possible solution?
I am acting for the shareholders of a private company (X) who are selling their shares to YZ Limited (also a private company). The purchase price will be paid via a small cash injection by YZ Limited and the balance via a dividend to be declared and paid by X immediately following completion to YZ Limited who will then utilise this to pay the balance purchase money. It is anticipated that in practice this will all happen instantaneously. What considerations are there to look out for? One concern is that technically the dividend is due to the members on the register who at the point of it being paid will be the sellers; they do not want this to be treated as their income, presumably, as the beneficial interest in the shares will have been transferred, this will not be a problem? X has power to give financial assistance.
In the case of Kellar v Williams  2 BCLC it was held that a capital contribution reserve became "like share premium part of the owner's equity". In addition, Palmer's Company Law (at 4.022) notes that where capital is contributed to a company, which is not a loan, but no shares are allocated, the funds are to be treated like share premium as part of the owner's equity and therefore capital contributions are to be treated as if they were part of paid up capital and so are not profits available for distribution. The Companies Act 2006 on the other hand does not mention capital contribution reserves and so it seems to be unclear how exactly a reduction/cancellation of the capital contribution reserve should be treated. Would the prudent view be to treat a cancellation of the capital contribution reserve as a reduction of capital (and as such to comply with the procedure for reduction of capital by way of a solvency statement)?
Section 424 CA 2006 requires that the accounts of a public company be sent to members at least 21 days before the relevant accounts meeting. It does not appear to indicate that this time period only refers to "clear days", and the requirement appears to be that the accounts should be 'sent' within this timescale (as opposed to a requirement that they be 'received by' members within such timescale). A company could therefore still comply with this requirement even if the accounts are sent out slightly later than the notice of AGM (provided that they are sent at least 21 days before the meeting). Are you aware of anything that would affect this requirement and do you agree with this interpretation?
When a private limited company reduces its share capital by the solvency statement procedure, is it only the issued share capital that is reduced or is the authorised share capital also reduced? Please assume that the board and shareholder resolutions facilitating the transaction do not specifically refer to reducing the company's issued or authorised share capital.
My client, a small private company, has 4 classes of shares. In a contract of employment, it gave some shares to an employee some years ago. Those shares have been valued and the employee, who has left the company, has agreed to sell the shares back to the company at the valuation given by the company accountant. The company paid the money for the shares and the seller (former employee) gave back her share certificate. The company has asked if there is any document (or contract) that should have been used. PLC refers to a share buy back contract. Is this necessary and, if so, what type of contract would be suitable for an employee selling back to the company shares she held? The articles permit the company to buy back shares.
Where a shareholder has contractually waived their voting rights in relation to the shares they hold in a company, are they still an "eligible member" of that company for the purposes of section 289 of the Companies Act 2006?
I have a situation where there is an off market buy back of shares in the company out of distributable profits. The shareholding being bought back is jointly held by Mr A and Mr B. Mr B also separately holds shares in the Company himself. Do you have a view as to whether or not Mr B is able to vote on the resolution approving the buy back agreement (in respect of the shares he holds himself) or does s.695 mean that is not able to?
I am converting redeemable shares into ordinary shares. They will be essentially exactly the same, although clearly no longer redeemable by the company. Do you think that this would constitute a variation of class rights, merely by the change of name?
If an unlisted public limited company was re-registered as a private limited company (with no change to the name other than plc to ltd), would the re-registration count as a change of name under the Companies Act 2006 and therefore mean that the directors would need to wait 3 months before submitting the strike off application?
Should draft minutes of an AGM meeting be read and validated by members of a small company before it is signed by the chairman. Should minutes of the last AGM be adopted at next AGM. How are AGM minutes verified before being signed.
I wonder if you can assist with a situation that is confusing me. A client company incorporated under the 1985 Companies Act wishes to make a charitable donation. The memo and articles (incorporating Table A) have not been amended since the introduction of the 2006 Companies Act, thus I am aware that the company will be restricted by the objects clauses contained in the memo, which do not include an express power for the company to make charitable donations. Can we pass a special resolution to amend the memo (which is incorporated into their articles under the 2006 Companies Act) and if so what are the filing requirements at Companies House- must we file the articles with the memo appended? Or is there a better, simpler way of giving them the right to make a charitable donation? I am aware we can remove the objects clause by special resolution (then the company would have unrestricted objects) but in doing so we would remove the limitation of liability and authorised share capital. Your help would be appreciated.
When performing a capital reduction with a direct payment to shareholders (no creation of a distributable reserve) does the company have to make the payment to the shareholders all at once or could some if it be left outstanding on a loan?
A private company has 500 A shares and 500 B Shares. The A and B shares have been created as part of a scheme to partition the business which has two separate activities. The B shareholder recognizes that his shares are worthless because his side of the business has no value and has resigned as Director and gifted them to the Company for no consideration. The A shareholder wishes to cancel them and wishes to pass a Special Resolution to extinguish the 500 B shares. He intends to use the Solvency Statement method and file form SH19. Unfortunately the A shares are only 50% of the share capital and not by themselves enough to pass a special resolution. Can a Private Company vote the B Shares to pass the Special resolution? Alternatively can the company give the shares to the A shareholder to vote them in order to pass the resolution. The A shareholder is the only Director and Shareholder left in the Company. Can we avoid issuing 1000 shares to him just to increase his shareholding to 75%?
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?
Re the financing of a buy back from capital in private company you say that if a premium is payable on the shares to be bought back the premium must be paid out of distributable profits. Where in the CA does it stipulate this please? My understanding is that shares can be bought back from capital at the level agreed between the parties, regardless of whether it is at par or more than par.
I've just read this practice note http://corporate.practicallaw.com/1-386-4240#a797205 and just to confirm, the ordinary resolution to approve the buy-back contract does not need to be filed with Companies House? If a special resolution is passed in respect of the out of capital element then this will need to be filed.
We are dealing with a company that has two classes of shares, ordinary and preference shares, both in denominations of £1, in issue. Different rights attach to each class. We do not intend to increase or decrease the issued share capital or change the denominations of the shares. In that situation, is it possible to reclassify the preference shares as ordinary shares under s.630 Companies Act 2006?
Regulation 81 of Table A indicates the office of a director shall be vacated if he ceases to be a director by virtue of any provision of the Act...(Reg.81(a)). 'The Act' is defined at Reg.1 as the Companies Act 1985 including any statutory modification or re-enactment thereof. For companies still operating under Table A, does this now refer to the Companies Act 2006 or to the otherwise defunct Companies Act 1985?
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 company has fully paid up share capital and intends to carry out a buy back of certain shares. However, the company currently has no distributable profits and so in order to carry out the buy back, the company is proposing to create distributable profits. We appreciate that this could be done by way of a capital reduction, however is it possible to instead create distributable profits by reducing the amount paid up on each share? So, for example, 100 shares of £1.00 fully paid up would become 100 shares of £1.00 with £0.50 being paid up on each share?
I am instructed in connection with a "Scheme of Reconstruction" substantially in the form set out in PLC Practice Note; Stamp Duty: reliefs". A Ltd (100% owned by Mr X) will transfer its business assets and liabilities to a Newco (B Ltd) and BLtd will in return issue shares to Mr X. Questions: (a) What is the "consideration" passing to B Ltd for the issue of the Shares to Mr X. Are the shares "fully paid"? (b) What Forms need to be filed at Companies House? (c) What is the commercial justification for A Ltd transferring its business and assets and not receiving any consideration for them directly?
Re reduction of share premium account under s 641 to 644 CA 2006. If the company decides to repay the capital to shareholders, does it have to repay to those shareholders whose shares subscription created the share premium account or can it pay the money to holders of another class of shares who subscribed for their shares at par only? S 641(3) is very vague. The resolution of shareholders in your precedents approving the return of capital to shareholders implies that it has to go to the sharehoders who paid the capital in the first place.
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.
I am preparing EMI options for a client wishing to incentivise employees. The Company's accountant has estimated the total current value of the company as £120,000. There is currently only one share in issue and the shareholder wishes to grant options to 4 people, each equating to a 5% shareholding. We have been giving some thought as to how to achieve this and have considered sub-dividing the existing share into 100 shares of 1p each. The client has expressed a preference to have 1000 shares of 1p each, which would require us to issue new shares to the existing sole shareholder - what is the best way to proceed? I do not want to trigger any adverse tax consequence for the shareholder. Would he have to subscribe at market value? Or could we do a bonus issue? Thanks for your help.
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.
I am looking at a redemption of redeemable preference shares that took place in 2009, for which no SH02 was filed at the time. Having spoken to Companies House they will accept a retrospective filing. I have yet to confirm if the redemption was out of distributable profits or out of capital and we have not yet been able to locate any resolution approving the redemption. Can you please tell me: (1) if the redemption was out of distributable profits, would a resolution have been necessary, and (2) if necessary, or if the redemption was out of capital, is it possible to pass a resolution retrospectively ratifying the redemption?
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?
A private company limited by shares has 100 issued ordinary shares of which 50 are partly paid (50% paid up on each such share i.e. 50p on each therefore amounting to £25) and the other 50 are fully paid up (£50). The share capital account therefore shows £75. Question: If this company wanted to undertake a reduction of share capital then presumably it could, provided the special resolution made it clear which shares were being cancelled, cancel the partly paid shares and the amount of those partly paid shares (£25) could be credited to the profit and loss account (in the usual way for a reduction with fully paid up shares) with a view to increasing the reserves position of the company?
A company has fully paid up shares it does not need, the shares are nominal value of 10p each. What are the issues to consider in deciding whether to do this by way of a share buy back or a capital reduction?
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?
Majority shareholders in a private company are selling their whole shareholding (100%) of ordinary shares, but as payment will be made in instalments it is proposed that only 51% of the shares be transferred at completion and the balance later. Can the sellers oblige themselves to waive all future entitlement to dividends-or will this not be binding for future declarations?
We are changing the Articles of Association incorporating 1985 Act into ones based on the Model Articles for private companies with limited shares. We reduced the nominal value of our ordinary share from GBP1.00 each to GBP0.57 each but it was not reflected in our Memorandum. Do I understand correctly that if we change the Articles of Association then the Memorandum will be left unchanged as a result?
I'm advising a 1985 Act company limited by guarantee. I'm going to update their Articles (in fact create new ones based on the PLC model) and these will incorporate some of the objects originally set out in their old Memorandum. What's not entirely clear to me is whether in doing so I need also to disapply the old Memorandum. As I understand it by virtue of the 2006 Act those provisions in the old Memorandum now form part of the existing Articles. On this basis to replace the existing Articles would be to replace also the provisions imported into them from the old Memorandum. First, is this right? And secondly, would it be good practice to make it clear that, for example, the old objects clause no longer applied. And if so, how?
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.
This is in relation to section 67 of the Companies Act 2006 – Power to direct change of name in case of similarity to existing name. Would the inclusion of the preposition “of” mean a company name is not deemed to be similar to another name already on the Companies Register? For example: Bartholomew's of Burnham Market Ltd, Bartholomew’s Burnham Market Ltd. We assumed that it would be regarded as too similar but guidance on the Companies House website has us questioning this assumption.
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?
I would like to know what a control contract is (see point 3, Subsidiary undertaking). I am assuming that it is simply a contract between the parent undertaking and the subsidiary undertaking. Is this correct or are there any essential components that conventionally would be expected to be found in such a document.
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?
Before winding up a private limited subsidiary company I need to address the outstanding loan it made to it's sole shareholder parent company. Can repayment simply be waived by resolution of the subsidiary or is a more involved procedure required?
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?
Is it possible to amend the articles of association of a company to set out therein a simplified process for doing a share buyback out of capital? Do you have any precedents/articles on this which might assist?
Is it possible to give a third party who is not a shareholder a right of veto in the articles so that: 1) the restricted objects cannot be changed without consent of the third party (and presumably this would be a right of entrenchment as it would be require more than a special resolution to change the articles) and 2) the shares cannot be transferred without consent of the third party (effectively giving a class right to a non member). I recall a case whereby a solicitor was given such a right but cannot find it on plc. The matter I am advising on involves different facts, but possibly the same principle.
When amending Articles of Association to include multiple entrenched provisions, is it appropriate to: (i) file a single Form CC01 and provide a copy of the Articles of Association to Companies House; or (ii) provide a separate Form CC01 notifying each entrenched provision?
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?
A client wishes to re-designate the entire issued share capital of their company as ordinary shares. As the holders of D preference shares will be loosing certain beneficial rights it has been suggested that in exchange for this loss for every 1 D preference share they are to receive 1.1 ordinary shares. Both the ordinary and D preference shares have a nominal value of £0.01 each. Is it possible to do this, just with the provision that the additional shares are partially paid up. For example could 10 D preference shares of £0.01 each be redesignated as 11 ordinary shares of £0.01 each partially paid with 10/11 paid up?
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
My colleague has drafted a Nominee shareholders declaration of trust using your template document. The client has queried what would happen on the death of the nominee. My first reaction is that as the nominee will be seen as the legal owner of the shares the articles will need to be considered to see what happens on the death of a shareholder. However it does not seem right that on the death of the nominee that those shares must be offered to all the shareholders pro rata (which would not include the beneficiary) or if the articles were silent that it would go to the nominee's estate. Could provisions be placed in the declaration of trust dealing with the possibility of the nominee's death allowing the shares to transfer to the beneficiary, or allow the beneficiary to appoint a new nominee, or will provisions need to be placed into the articles?
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?
Private company limited by shares will hold AGM in June, 2013. I am aware that we have to have 14 days plus 48 hour between notice and the actual AGM. We have several shareholders in Japan. Does the 48 hour addition always apply even for overseas shareholders when it is more likely to take more than 48 hours for the notice to be received?
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?
Company A is a parent of company B (A owns B 100%). Company A intends to reduce a loan owed to it by company B (company B is unable to pay the full amount and so A would like to reduce the amount owed). How should this be documented? Does company A need a board meeting approving the reducing of the loan? Does company A then need to write to company B confirming that the loan has been reduced (with company B counter signing the letter acknowledging that the loan has been reduced?)
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?
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.
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.
If the articles state that should an employee shareholder of a Company leave there is a deemed transfer notice and the shares are offered initially to the Company would that count as shareholder approval?
From what I understand about share forfeiture, a shareholder who has fully paid shares cannot turn around to the company and hand over their share certificates and simply cease to be a shareholder, even if they do not want any money in return and therefore would not be reducing the company's share capital. Please could you confirm whether my understanding is correct and if it is, why this is the case?
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 questions relate to reduction of capital. To assist me in posing the questions I would like to refer to a fictional company which has an issued share capital of 100 ordinary shares of £1-00 each of which A holds 70, B holds 20 and C holds 9 and D holds 1. There is a share premium account of £100,000 and the company is considering a reduction of capital. My questions are as follows: 1. What is the linkage between the Share Premium Account and shares at law. By way of example is it possible to reduce the Share Premium Account by 50% without reducing the issued share capital by 50%, that is to say reduce the Share Premium Account by £50,000, repay that to the shareholders and leave 100 ordinary shares of £1-00 each in issue? 2. If there is a directly proportionate relationship between the issued share capital and the Share Premium Account, would it be lawful to re-designate the ordinary shares of £1-00 each to 10,000 ordinary shares of £0.01p each immediately before the capital reduction, reduce the issued share capital to 100 ordinary shares of £0.01p each and repay 99% of the Share Premium Account to the shareholders. 3. What is the relationship between the issued share capital and the impact of a share reduction - is it proportional? To use the above example if the share capital was reduced by 50%, would this mean a reduction in all holdings of %50? If that is the case, what would happen in relation to D who only holds one share and C who holds a number o
Where the articles state that holders of a certain share class are not entitled to receive notice of, to attend, to speak or to vote at any general meeting of the company, does that also mean that such shareholders are not entitled to vote by written resolution? If so, can you point to the relevant authority?
I have been tasked with finding out whether the best way to strip out an underperforming part of our client's business would be via an indirect demerger. (i.e. topco transferring the underperforming business to Newco) or through a standard business and assets transfer. I am aware that a demerger, if all the conditions are satisfied, exempts the distributing party from any CG tax and also exempts the transferee from having to pay any consideration, which would be ideal in this situation and more advantageous than a standard business and assets transfer. However, the point I need clarification on is the following: Topco is a company limited by guarantee - are such companies able to take part in demergers considering that they are not able to declare a dividend?? I look forward to hearing from you.
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?
Can a company (B) which has 10m of shares owned by company (A) and which has completed a capital reduction to create distributable reserves of 5m convert 4m of this straight into a loan from A rather than paying a dividend of the full amount? i.e. B would pay A a dividend of 1m and treat the 4m as an intercompany loan.
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 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.
PLC's Paper on Intra-group reorganisations under the heading 'Return of capital and distributions in kind' includes a note which states that: "A downstream transfer of assets at an undervalue by a parent to a wholly-owned subsidiary will not be a distribution as the investment in the subsidiary receiving the transferred assets should increase in value by the value of the assets transferred". The notes states that a downstream transfer of assets to a wholly-owned subsidiary would not amount to a distribution. However, if there was a downstream transfer of assets by a contributing company to its 85% owned subsidiary and the 15% shareholder of that subsidiary indirectly benefited from the transfer of the assets and both the shareholder of the contributing company and the subsidiary's 15% shareholder are the same entity (i.e. a common parent), could this be classed as a distribution to the extent that it benefits the 15% shareholder of the subsidiary?
Our client company has recently incorporated a new subsidiary, adopting the Companies Act 2006 Model Articles for private companies limited by shares as its articles of association on incorporation. Our client now requires its subsidiary to adopt a new set of articles containing a bespoke conflicts of interest article permitting directors to vote (subject to any disclosures required under the articles and subject to any terms and conditions imposed by the board) in respect of any proposed or existing transaction or arrangement with the company in which they are interested, on the basis that Article 14 of the Model Articles will not apply to the company. The new articles are due to be adopted by the subsidiary company as a preliminary step, before the subsidiary enters into various transactions and arrangements with the parent company. As the two companies have common directors, it could be argued that none of the directors of the subsidiary are entitled to vote on a resolution approving the circulation of a written resolution adopting the new articles of association, under the conflicts restrictions in Article 14 of the Model Articles. Therefore, the board meeting of the subsidiary will be inquorate. In order to avoid this problem, it is proposed that the shareholders written resolution of the subsidiary company adopting the new articles of association should be proposed and circulated by the parent company under the procedure set out in sections 292 to 295 of t
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?
My query relates to dividends in specie. In a scenario where you have a wholly owned subsidiary (Currentco) which owns a property and it proposes a dividend in specie of the property to its Parentco, can the Parentco create a new wholly owned subsidiary (Nomineeco) and direct that the dividend in specie of the property is satisfied by transferring title to the property in favour of and to Nomineeco thereby enabling Nomineeco to leaseback the property to Currentco and ultimately enabling Parentco to be liquidated under a section 110 demerger process and the shares in Currentco and Nomineeco transferred to different newcos by the liquidator in exchange for shares in those newcos and those shares in those newcos then distributed to the shareholders of Parentco?
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?
We are transferring shares internally and wanted to check the law applied to transferring a share at its nominal value rather than the book value. We would like to transfer the shares of 1 for 1 even though the book value is higher. The Directors believe it is in the best interest and secondly, it is an internal transfer. What law applies to this scenario that allows us to do this?
Does the The Companies (Shareholders' Rights) Regulations 2009 apply to Companies Limited by guarantee with members but no share capital? I am particularly interested if the new right of members to include a matter in the AGM business would apply?
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 company 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 documents (board resolution or POA) on the PLC website to effect this, therefore, would you be able to assist?
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?
Last year we assisted a client with a reduction in share capital by decreasing the share premium account to nil. It has come to light that the accountant's calculations were wrong and the share capital has not been reduced by as much as anticipated (i.e. there is still an amount left in the share premium account). Does this invalidate the reduction and the special resolution that was passed by the shareholders? Is it possible to rectify this error and if so how?
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?
If a company had a number of share classes (e.g. ordinary shares with voting rights and preference shares with no voting rights other than on a reduction of capital), is there any prohibition on a scheme of arrangement being with the ordinary shareholders only in a reduction scheme? The preference shares would simply be redeemed in accordane with the articles upon the reduction of capital and the preference shareholders would have a right to vote on the reduction of capital special resolution, but not the scheme of arrangement. Would the fact that the preference shares would be cancelled subsequent to the scheme and reduction becoming effective mean that the preference shareholders would be deemed to be affected by the scheme of arrangement and thus be required to vote on the scheme as a separate class?
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
We are asked to advise on the transfer of 300 jointly held ordinary shares into the individual names of the joint holders so that they hold 100 ordinary shares each. We believe this can be achieved by preparing three separate stock transfer forms executed by all three joint holders as transferee. The consideration for each transfer is presumably the execution of the other two transfers by the joint holders. We have two questions: 1. Is this the only way to achieve the intended outcome? 2. If this is the best way to achieve the intended outcome, what is the stamp duty position regarding the stock transfer forms?
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 am doing a share buy-back out of capital and am trying to find out if there is a short-cut to this process where the company has never traded and has no creditors (and a small number of shareholders - so we will use a written resolution). Can you help point me in the right direction of the answer? Thanks.
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)?
A client is the sole member of a private limited company. It believed the company had been formed with 1p shares, of which 10,000 were issued and described in minutes, certificates, the transfer from the nominee subscriber etc as fully paid, although it does not appear anything was in fact paid to the company. In fact the shares were 1 shares so that there is a potential liability of 10,000. The sole member wishes to reduce that liability to 100 as originally intended. The only course seems to be to surrender 9,900 shares on the basis that the articles would permit forfeiture as a result of the non-payment. What does not seem clear is what the status of those shares is after the surrender. It does not appear that they are automatically cancelled or that there is any means for cancelling them - they seem to become the property of the company. Any thoughts would be welcome!
What would be the consequences to a third party where an individual with a power of attorney entererd into a contract with the third party ultra-vires of the power conferred on them? Would the third party (acting in good faith) have an enforceable contract against the donor, with the donor having recourse to the donee?
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?
Suppose the company reducing its capital has a deficit on reserves of say £100k, and wishes to do a capital reduction of £300k. If you follow the 2-stage process of creating a reserve and paying a dividend, you would only be able to distribute £200k. But could you have a £300k payment direct to shareholders if you took the single stage approach, or would you be limited by the deficit on reserves?
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?
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?
Can a company apply for voluntary strike off if it still has debts/creditors? I know that within 7 days of the making the application the application needs to be served on all interested parties. However I wondered if it is possible to avail yourself of strike off if the company has debts.
Some of the subsidiary companies in our group (all privately 100% owned) adopted Table A to the Companies Act 1985 but made the "usual" amendments, some of which refer to sections of the 1985 Act. Do the Articles remain valid notwithstanding that the 1985 Act has been replaced? If the Articles are updated with reference to the 2006 Act and should we wish to make modifications to the standard form articles, is it correct to refer to the Model Articles or Table A of the 2006 Act?
I have a 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.
Our client is a private company. A small number of its shareholders have been untraceable for many years and our client wishes to sell these shares and hold the consideration in trust until claimed by the untraceable shareholders. We see that other users have asked about dealing with untraceable shareholders and it has been suggested that the company articles are checked for a specific power of sale. Unfortunately, the articles in this case make no provision for dealing with untraceable shareholders. We have considered amending the articles now to confer this power on the company. However, as untraceable shareholders have already been identified, it will not be possible to notify and have them vote on the resolution to amend the articles conferring the power of sale. Can you advise if conferring a power of sale in the articles would be the best procedure to use in this case, notwithstanding that the company is already aware of untraceable shareholders who will not be contactable in order to vote on the change to the articles?
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?
In connection with a Share Buyback, can you confirm if it is lawful for a private limited company to purchase shares at less than the nominal value of those shares? I have never been instructed to draft documentation where the company is paying less than the nominal value of the shares which it will acquire, but I would like to know if it is permissible. For example, if a company wanted to purchase 100 ordinary shares of £1 each for £10, would that be lawful under the CA 2006?
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.
I have a question in relation to a company (incorporated in 2003) whose articles contain Table A. In 2010, shares were transferred in the company but the transfer was never recorded in the company books and the transferee entered into the register of members. The articles make no reference to a requirement to register in register of members (as per Model Articles). Who is the owner of the shares? The stock transfer form is missing.
I have a situation where a controlling shareholder wishes to fund the company via an issue of (yet to be created) preference shares. Currently, the company has a single class of ordinary shares. The Company does not have any pre-emption right provisions currently applicable and the controlling shareholder has enough support (with his own shareholding) to reach the 75% majority required to pass the necessary special resolutions. My questions are: (i) Is there anything that prevents the controlling shareholder voting in favour of the creation of the new class of shares (to be issued to him) i.e. could some sort of conflict argument be run which would mean he should abstain from voting? (ii) Notwithstanding the lack of pre-emption rights, should the new class of share be offered pro rata to the other ordinary shareholders to avoid any question of unfair prejudice?
Can a share certificate be executed by a director who is also the proposed shareholder whose name the share certificate is to be put into? Is there a different position where two directors are executing the share certificate and one is the proposed shareholder?
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.
I am looking to reduce the share capital of a private limited company to 1 and to create a reserve from the reduction in capital that will be distributed. The company has an authorised share capital of 1000 with each share having a nominal value of 1. 500 of the shares are allotted, called up and fully paid. Please confirm that: 1) the value of the reserve that will be created will be 999; 2) the authorised share capital will be 1 share of 1; and 3) the alloted, called-up and fully paid share capital will be 1.
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.
Re: Resolutions (member): authority to allot and disapplication of pre-emption rights: private and unlisted public companies. Are these resolutions required if the company's articles state that sections 561 and 562 of the Companies Act 2006 are excluded?
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?
Please could you advise on the validity of a memorandum of association of a company that was incorporated in 1985 and has since amended its articles of association (in 2011), but without reference to incorporating the registered memorandum. Is the memorandum still valid? Or, following the implementation of the 2006 Act, do the recently registered Articles necessarily over rule the memorandum and they are therefore now void?
I am drafting articles and a shareholders' agreement for a new company in terms of which the investor may convert certain of its ordinary shares into deferred shares if certain conditions are met by the management shareholders (effectively to operate as an incentive/performance ratchet). Do you have any precedent wording in relation to deferred shares?
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?
I have a client that is a registered charity. They wish to change their trading name only (not the name registered at Companies House). What are the main considerations for a charity when changing their trading name?
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?
Our client wishes to hive up its business to a holding company by way of a dividend in specie. The business comprises a freehold property (subject to a legal charge), other assets and liabilities. We believe s.845 of the Companies Act 2006 will apply. What level of profits available for distribution will be required in order for the dividend in specie to be lawful? Will it be: The value of the property stated in the accounts (less depreciation), or the property value (less depreciation) less the debt secured by the legal charge which the transferee will assume to pay, or the amount in (2) less the other liabilities to be assumed?
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?
All of the shares in a UK company were transferred to a Cyprus company (Company X) in 2009. Cyprus Company X now wants to transfer all the shares it holds in the UK company to a second Cyprus company (Company Y). Does the UK company have to do anything or is it a matter for the two Cyprus companies? For example, does the UK company have to issue a new share certificate or inform UK Companies House of this second transfer (ie from one Cyprus company to another). If required, do you have a template share certificate?
Can someone resident in Jamaica grant a power of attorney to someone living in England to instruct lawyers to commence litigation for them in England? If so, should that Power of Attorney be an English Power, or can the authority be given by a Power made in Jamaica under Jamaican law? If, as I believe, the Power must be in accordance with English law, not Jamaican, can it be given under section 10 of the Power of Attorney Act 1971 or does it need a specific wording? Does a power under section 10 permit the attorney to instruct a solicitor to commence litigation on the donor's behalf?
In this document [Practice note: overview, Schemes of arrangement] you state: "At a directions hearing, before a registrar rather than a judge, the company requests an order to advertise in a newspaper the date of the court hearing to sanction the scheme. The advertisement must be placed in an appropriate newspaper at least seven clear days before the date of the court hearing to sanction the scheme." Could you please provide your authority for this statement?
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?
Has your view changed on whether adopting new articles, without reference to the existing memorandum, will suffice to delete the provisions of that memorandum, which would otherwise form part of the company's articles from 1 October 2009? I have seen this done on several occasions and wonder about the validity?
If a company, incorporated pre-2009, chooses to pass a resolution to (a) remove all the provisions of its memorandum that were deemed to form part of its articles and (b) adopt new articles, when do the new articles take effect? Part of the effect of the resolution will be to remove the company's objects (although the resolution will usually not specifically refer to the objects). Section 31(2) requires a Form CC04 to be submitted to the registrar and it goes on to state that "the amendment is not effective until entry of that notice on the register". Does s31(2) therefore mean that the adoption of the new articles is not effective until the CC04 is registered or does s31(2) solely delay the removal of the objects clause? It would seem to me to be more logical to work on the assumption that s31(2) only delays the removal of the objects and that the other amendments take effect immediately on the passing of the special resolution. I would, however, be grateful for any thoughts you may have.
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?
In relation to the wording at 1.3(c) which states that the directors may allot shares after the expiry of the 5 year authority in pursuance of an offer or agreement as if such authority had not expired, is this designed to cover say exercise of an option under an employee share scheme where exercise takes place after the 5 year period so that no further authority is required?
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?
I was wondering whether you have any thoughts on whether it is possible to complete a Deed where it has not been possible to have all parties sign that Deed. The position my client is in is that a previous firm of solicitors drew a Shareholders' Agreement which was signed by 70 or so shareholders. This was done some years ago. The company has grown significantly and that Shareholders' Agreement now contains a number of provisions which are either no longer relevant or not ideal for their current plans. We have prepared a deed of termination and have counterparts with 67 or so shareholders signed. We have been unable to trace 3. Do you have any general suggestions as to our options here? I appreciate you cannot give tailored legal advice but it would be good to know whether we can terminate between the 67 or whether there is any sort of de minimis concept with regards to completing the deed.
If a 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?
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?
I have a client who wants to communicate with shareholders electronically. Schedule 5 of the 2006 Act provides that this can be done where general or specific consent is obtained from persons, but it is vague in relation to companies stating that documents can be sent in electronic form to a company that is deemed to have so agreed by a provision in the Companies Act. Could you provide some clarification as to the position on obtaining consent for electronic communication where the shareholder is a company?
After a share for share exchange has occurred and the target is waiting for adjudication back from HMRC on whether stamp duty is payable or not on the transfer, can the target company pay a dividend (either cash or dividend in specie) to its new parent during this period, when the parent is not a registered member, or will the target have to wait until the stock transfer forms have been adjudicated and the statutory books written up? Alternatively could the target update the statutory books on the basis that it reasonably considers adjudication to be forthcoming?
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?
Would a director be considered reckless if they sought to reduce the capital of a private company by passing a special resolution supported by a solvency statement if they were planning to sell the company in the near future?
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?
In respect of a Community Interest Company is it possible to have a private company which is limited by guarantee and with a share capital or is this expressly excluded? I am unclear between what is stated in the Companies Act 2006 and the Community Interest Company Regulations 2005.
We are acting for a company with five shareholders. One shareholder (A) is currently leaving and another shareholder (B) has given notice to leave. We are looking at funding the acquisition of A's shares by (1) repaying the premium that A paid on subscribing for his shares and (2) repaying the premium that two other shareholders (C and D) paid for their shares and then using that sum towards the purchase of A's shares. If we reduce the share premium account by way of a reduction of capital and create a reserve which can then be treated as a realised profit and distributed, presumably we would have to distribute it pro-rata between all the shareholders? However, is there anything to prevent us reducing the capital by simply repaying the amount of premium paid by A, C and D to them (as a repayment of paid-up share capital in excess of the Company's wants) without repaying B's premium (the fifth shareholder did not pay a premium)? It is, of course, possible that we will later repay B's premium as part of the arrangements for buying back his shares.
We are reviewing the articles of association of a company, focusing in particular on the transfer provisions contained therein. The sole transfer provision contained within this company's articles provides as follows: "The Directors may, in their absolute discretion and without assigning any reason therefor, decline to register the transfer of a share, whether or not it is a fully paid share, and Clause 24 in Table A shall not apply to the Company." Table A in this context refers to the Regulations contained in Table A of the Companies (Tables A to F) (amendment) Regulations 1985. Could you please advise me (or point me in the right direction) as to whether such a provision confers upon the company's directors an unfettered right to register a transfer, or whether in fact, it will always be subject to 'reasonableness'?
Under a Shareholders Agreement, I would like to provide that shareholders include in their wills a requirement that if any shares in the company are held at the shareholder's death, then the executors will hold them as nominee for the company and will act and vote in accordance with the company's instructions. Do you have a precedent will clause to that effect and indeed a suitable clause to go in the Shareholders Agreement?
I 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, Company A became a wholly-owned subsidiary of Company B, yet it holds a minori
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).
I am redesignating a Company's existing A, B and C ordinary shares (A and B ordinaries rank pari passu in all respects and the C ordinaries rank pari passu except they have no voting rights) into A and B shares (some of each will become As and some of each will become Bs depending on the identity of the holder). The As and Bs have different rights to certain profits and assets of the Company on a distribution. New articles will be adopted setting out the rights of the A and B shares. Does this constitute a variation of class rights for the purposes of s630 CA 2006? Both sets of articles are based on the model articles for a private company limited by shares so have no variation provisions. If so, what do I need to file; SH08 and SH10 in addition to the special resolution adopting the articles and redesignating the shares, and a print of the articles?
I am aware that a transferee of shares does not become the legal owner of those shares until his name has been entered into the company's register of members. If the transferee's name were to be entered into the register of members before the stock transfer form has been stamped or adjudicated as exempt, presumably this may constitute an offence under s.17 of the Stamp Act 1891? However, would it affect the transferee's title to the shares? Would he still be the valid legal owner of the shares from the moment his name is entered on the register of members, despite the stock transfer form effecting the transfer not having been stamped?
Do you share the view that it is possible to circumvent pre-emption type provisions arising on a transfer of shares under the Articles of Association where all shareholders are in agreement and sign a waiver type document to that effect?
A client is the majority sharehoilder in a small private English limited company she founded. The shares are held 60:30:10 with 2 other shareholders. She wants to pay dividends 45:45:10, essentially giving up part of her dividend entitlement to the colleague holding 30% of the shares. This is for commercial reasons (they are unconnected apart from the business) and reflects his increased role in the running of the business, but she does not wish to change the share balance in terms of voting and control. This arrangement is expected to last approximately 2-3 years, until he retires. Rather than creating a new class of shares, carrying dividend rights, it seemed to me much simpler to use a dividend waiver by each of the 2 (60% and 10%) shareholders. This can be contained in a shareholders' agreement currently being drafted to cover other issues. Would this be effective to last 2-3 years and can it be contained in such a document?
In section 17 CA 2006 it says references to the constitution "include - the company's articles and any resolutions and agreements to which chapter 3 applies." In section 32 "Constitutional documents to be provided to members" it refers to a current statement of capital and certificate of incorporation etc. Is it possible that the statement and certificate form part of the "constitution". I think it could be inferred that these are part of the constitutional package and section 17 says "include" rather than "consists of" or other such wording.
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 was hoping you could direct me to an article which discusses “associates”/"associated companies" in the context of joint ventures. What is required for a legal entity to be considered “associated” with another entity? Does the Companies Act give a definition of associated entities?
I have a question regarding disapplication of pre-emption rights for share allotments pursuant to an employee share scheme. The Articles of the company in question have disapplied the statutory pre-emption rights under section 561 and 562 CA 2006, and alternative pre-emption rights have been incorporated into the Articles, but there is still an obligation to offer the shares to existing members in proportion to their existing holdings. These pre-emption rights need to be disapplied as the company is in the course of granting share options to its employees (so that there is no requirement for the shares to be offered round to existing members at the time of exercise of the option). I understand that there is no issue regarding authority to allot under section 549. My question is whether the disapplication of pre-emption rights for the shares to be allotted under the share option needs to be contained in a new set of Articles or whether it is competent to set this out in the text of the special resolution itself. The company has only recently adopted a new set of Articles so from an administrative perspective it would be easier to circulate a written resolution without having to circulate a copy of a new set of Articles as well.
A number of shares in our client were transferred to a new shareholder by an existing shareholder, however the transfer was in breach of the Articles of the Company. The transferor was also a director and so registered the share transfer in his capacity as a director, though without holding the requisite board meeting or making the other directors aware of the registration. We are currently pursuing a litigation case, but I am interested to know if there is a specific procedure that we need to go through to have the share transfer 'reversed' as it was not a valid transfer? The transferee will not be willing to sign a Stock Transfer Form, and therefore any thoughts would be much appreciated.
If shares in a company are listed on the ICAP Securities and Derivatives Exchange can the shares be transferred in the usual way, ie by stock transfer form, or is there a different process/additional requirements to comply with?
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?
I have a client who wishes to transfer a freehold (which has no value) to a group company for £1. There is only a minor service charge responsibility where they are to provide upkeep to the roof, etc and be reimbursed by the tenants. The group company will subsequently be dissolved and the property (being its only asset) shall pass to the crown. My query is, will the directors have any residuary liability? I can’t see how TUV applies, but could the tenants have any possible action?
Where a Director is also a shareholder, can you legitimately put the same service address in the register of members as in the register of directors? There seems little point being able to protect the director through entering a service address under s.163 Companies Act if you then have to enter the residential address in the register of members?
We are currently considering ways to achieve a group re-organisation. One of the steps involves the transfer of the business and assets of a subsidiary to its parent. The transfer will be done at book value and the parent will assume all liabilities in connection with the business and assets transferred. One way of doing this is via a straight forward asset purchase agreement. We appreciate that as the transfer is at book value, it will be treated as a distribution in kind and the rules in s845 will apply. We also appreciate that it will be treated as a transfer at undervalue and so care has to be taken to deal with the issues you highlight in your practice note such as directors' duties, insolvency and fraud on creditors. Your practice note on demergers also suggests that the transfer could potentially be achieved by a direct dividend, ie subsidiary declares a dividend in specie of the business and assets. Given that the intention is for the parent to assume the liabilities of the business and asets to be distributed I have a number of queries as follows. 1. I assume that there will need to be an agreement between parent and subsidiary along the lines of an asset purchase agreement to deal with the mechanics of the transfer. Would this agreement usually be referred to in the members' resolution approving the dividend? 2. Is there any "best practice" regarding the wording used in the resolution ie is it preferable to state the amount of the dividend that is being d
I have a couple of queries on the note in your drafting note for the solvency statement. "The provisions relating to the winding up of a company are set out in the Insolvency Act 1986 (section 73ff). Note that the definition of winding up does not include "voluntary dissolution" (section 73(2))." If you are reducing share capital and intending to dissolve the company via a voluntary dissolution shortly after, does this mean you should use option A in the statement of capital? If so, how does this sit with the second part of the solvency statement "the Company will be able to pay (or otherwise discharge) its debts as they fall due during the year immediately following the date of this statement"?
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?
If Company A grants an irrevocable power of attorney to Company B to sign a transfer of freehold land to Company B once a development has been concluded (and after in fact it has) and if that PoA is stated as "only to be exercisable if an Event of Insolvency occurs in respect of [Company A]" then is the power still actually valid if Company A goes into liquidation? The document containing the PoA is registered at HMLR against the title.
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?
I am acting on behalf a newly formed company which is intending to purchase the entire issued share capital of a company which is currently part of a larger group for a consideration of circa £1.6m. The target company was, somewhat unusually, previously owned by my client. When the target company was acquired by its current owner it became part of the larger group and, for reasons which have yet to be clarified, the freehold property (value circa £1m) and the business were transferred to the new parent company. I was expecting to prepare the Share Purchase Agreement on the basis that my client's new company would purchase the issued share capital of the target company for full value. I have now received a Hive Down Agreement from the Seller's Solicitors pursuant to which the property and business formally conducted by the target company are to be hived down from the holding company to the target company. The consideration is stated as being £600,000 for the property and "the market value as between a willing seller and a willing buyer of the entire issued share capital of the target company". In each case the intention is that the consideration will remain outstanding as an inter-company loan. The property is also being transferred subject to the existing security in favour of the Seller's Bank. If the property is sold for a perceived value of £600,000 only, then presumably there will be a latent corporation tax liability arising on any subsequent disposal of t
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?
Under article 11(2) of the 2006 model articles "the quorum for directors' meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two". Where the company has a sole director, then under article 7(2) "the general rule does not apply, and the director may take decisions without regard to any of the provision of the articles relating to directors' decision-making". There is no specific reference here to articles 7(1) and 8 to 16 (inclusive) being disapplied, but presumably this is what is intended by "the articles relating to directors' decision-making". Is this right in your view? If so, is it also correct to say that quorum requirements are irrelevant because the sole director will simply pass written sole director resolutions on his own (and therefore article 11(2) can be ignored as he can take decisions "without regard" to this)?
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 a company legally use a laser printed seal or laser printed signatures to execute a share certificate? I note what you say in the practice note (ie that the Law Commission rejected laser printers), however, it has been suggested to us that it is permissible for a company to use a laser seal and/or laser signatures if the company's articles specifically allow for it?
Following a reduction of capital (director solvency statement route), if the company wishes to return these "freed up" funds to shareholders, will the procedure for declaring/paying a dividend as set out in the Companies Act 2006 have to be followed? Or is there automatically a distribution of the amount by which the capital is reduced to shareholders so that no separate dividend procedure needs to be followed? Does the reduction of capital have to result in a "distributable reserve" or can the amount by which the capital is reduced just be repaid to shareholders without following any particular procedure?
Where a person is acquiring or proposing to acquire shares in an overseas incorporated target, does section 679 of the Companies Act 2006 prohibit a public company that is a subsidiary of the target from giving financial assistance, directly or indirectly, for the purpose of the acquisition of shares in the target?
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?
If an employee shareholder is leaving their employment and as part of the deal the employee agrees to "give up" their shares, is it possible for the (private) company to buy them back at par (£1 each), notwithstanding that the company has previously bought back shares from another shareholder during the last year at a much higher price (£252)? I would have thought that it is in the company's interest to no longer have the individual as a shareholder (all other shareholders are involved in the business) and a buyback would most likely be the favourable option for the other shareholders as it would not involve anyone being diluted, so I think it would be fine from a directors' duties perspective.
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.
I have a query regarding treatment of beneficial shareholders in a capital reduction by solvency statement. This is in regards to a private limited company which legally has one shareholder, a nominee, which holds shares for the underlying beneficial shareholders. However, each of the underlying shareholders is given a different designation on the register of members, i,e X Nominees 1, X Nominees 2 etc. These designations are not incorporated companies. If one of the underlying beneficial shareholders no longer wanted to be a shareholder in the company, and there was no incoming shareholder to whom we could transfer the shares, we wanted to use a capital reduction to return that underlying investor's capital. As designations of the nominee are used on the register, should the nominee be counted as one legal shareholder, or should each designation be counted as a separate shareholder (ie is this sole shareholder approval or not)?Additionally, if it was approved, when the capital is returned to the nominee, could they pay the monies received in respect of the capital reduction and cancelled shares to one of the underlying shareholders as opposed to all of them? Would this be covered by company or case law or would this be to the discretion of the nominee company? Equally, the manager can instruct the nominee what to do in relation to shares; could we instruct the nominee to pay back to one underlying investor, whose capital is being returned?
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?
Please can you confirm whether the Companies Act 1948 contains any statutory rights of pre-emption? I am working with a company whose Articles are those of Table A Part II under the Companies Act 1948 and so far can find no reference to any pre-emption rights.
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 have a company incorporated under the 1948 Companies Act - the Articles have not been updated since and so reference that Act. Has the 1948 Act been repealed in its entirety? Will the 2006 Act now apply?
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).
I understand that generally speaking a company can make a loan to a shareholder and I have found the relevant tax practice notes in relation to loans to participators - what I cannot find and would be grateful for your help with, is where to find the authority stating that companies can make loans to shareholders?
I am familiar with the procedure for a company to purchase its own shares under section 690 CA 2006. Have you come across the situation where the person selling back to the company wants a top up payment - over say the next four years - if an offer is made for the company? I am familiar with anti-embarrassment clauses but not in a company purchase of own shares agreement. Do you think such a clause is possible? Would it create a contingent purchase contract?
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?
I wondered whether it is possible for an unincorporated organisation to be a member of a company limited by guarantee. I am conscious this is not possible in respect of a company limited by shares, where the shareholder on the register needs to be a legal person, if necessary, holding on behalf of the partnership or other organisation. However, in the case of a company limited by guarantee, provided the individual who signs the memorandum is authorised to do so by the partnership, is it possible for the named member to be "X Partnership" - with one of the partners signing the memorandum on its behalf - with the implication that all partners of the partnership are liable under the guarantee? The articles will contain a provision to the effect that any member other than a natural person needs to appoint an authorised representative to exercise their rights as a member.
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)?
I am Head of Legal and Company Secretary for a registered charity which is also a company limited by guarantee. We maintain a Register of Interests, but I am struggling to find out why exactly or what the Register should be used for. Do you know where the obligation to keep a Register of Interests comes from and what it should be used for? For example, should a copy of the Register be provided to the trustee/directors each year so they can authorise the interests of all the other trustee/directors? Is there an obligation to make the Register available for inspection even though we are a private 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 working on closing a non-trading company ("Company A"). The only asset of Company A is a promissory note of £500m due to it from another company in the UK Group ("Company B"). We would like to declare a dividend in specie of this promissory note so that it is transferred to its immediate parent company ("Company C"). As Company C will not be paying anything for the promissory note, I believe under Section 845 CA 2006, we'll need distributable reserves of 500m to do this. Our intention is to carry out a reduction of company A's share capital, capital redemption reserve and share premium account to create distributable reserves of just over 500m. Once the promissory note is transferred to Company C, is it then possible for Company A to declare a cash dividend of the 500m created by the various reductions before submitting the application to strike-off Company A?
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?
In a members' voluntary liquidation of a private company where the whereabouts of some of the shareholders is not known, what procedure should be followed? In particular, is there any obligation to to try and trace those shareholders?
Would a share sale be caught under the Law of Property (Miscellaneous Provisions) Act 1994? I cannot find a section which clearly identifies the definition of a 'disposition' or 'property'. I am confident that it does not, but I cannot find a particular section or reference which confirms this.
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?
A private limited company with only one acting director filed for strike-off (DS01) in September 2012 because it was struggling financially. The company has now been dissolved. The company had stopped trading in January 2012. This meant it did not pay rent in regard to the lease for its office from January 2012 to September 2012. When the director filed the DS01, a copy of the application was not given to the creditor (landlord) in accordance with s.1006(1)(c) CA 2006. I am aware that this means the director is potentially guilty of an offence under s.1006(4) CA 2006. In your article [Practice note, Company dissolution: voluntary strike-off], you state that when a company is dissolved "all property and rights vested in... the company immediately before its dissolution (including leasehold property) are deemed to be bona vacantia and pass to the Crown". Can you please clarify what the implications of this are in regard to the lease and the company's obligations under the lease to the landlord? Is it correct that the debt would cease to apply once dissolution takes effect? I am aware that the creditor could apply for restoration of the company as the correct notification procedure was not followed. Assuming the landlord does not apply for restoration, is it possible for the landlord to recover the debt from the director personally? An important point to note is that the company's extremely limited remaining assets (around £1,000) were kept by the director (as
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.
I am completing a stock transfer form. One shareholder is transferring both ordinary shares and A ordinary shares to another shareholder for consideration. Can I use one stock transfer to transfer both classes of shares or do I need to use two forms, one for Ordinary shares and one for A Ordinary shares?
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?
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 drafting a new set of articles for a company incorporated under the CA 1985 (using the PLC precedent for a private company limited by shares). I want the objects of the company to be unrestricted. Do I have to include anything specific in the articles to this effect?
I have been asked to organise the buyback of a share and am struggling to see within the notes an explanation to help me decide if the money is coming from distributable reserves or capital. The background: a development of 6 houses uses the same sewerage system. A separate company was created which owns the land and joint sewerage plant. Each house owner has one director and is a shareholder of the sewerage company. Regular contributions to the company are made by each house owner and a reserve of about £20,000 has been built up in order to deal with any running repairs or replacement of the plant. Each year further monies are being collected. One house owner has bought its adjoining property and the houses have been amalgamated into one and so the directorship and shareholding of the house that has been bought needs to be “extinguished”. I was proposing to deal with the shareholding by having the company purchase the share for its £1.00 nominal value. I’ve seen that you have two sets of notes etc. for dealing with this depending on whether it is a purchase from distributable profits or capital. I suppose my first question is whether the notes are geared towards a different type of share acquisition? If the procedures do have to be followed in full in my circumstances, how do I know which set of notes to follow? My clients are keen not to have to also engage accountants for the process which is becoming rather more time consuming and costly than they
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?
A company declared a dividend in specie in February. The dividend was the transfer to its shareholder of shares it held in subsidiary companies. All companies are part of the same group. At the time of the dividend, interim accounts were prepared that showed the company had sufficient distributable reserves. The company is now completing its audit and a couple of items have cropped up that reduce the reserves that the company would have had when the dividend was declared. As such, the company did not have sufficient reserves for a small part of the dividend. Does the company that received the dividend now need to repay that portion of the dividend? What is the effect of not having sufficient reserves at the time now that the dividend has been declared?
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?
I am looking at a private company limited by shares incorporated in July 1986 which adopted the Table A extant at that date including Regulation 50 relating to shareholder meetings viz: "In the case of an equality of votes ..... the chairman shall be entitled to a casting vote......" Am I right this became legally ineffective for all companies because of section 282 Companies Act 2006, but is now effective for a company which adopted Regulation 50 in July 2006?
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?
Is it possible for a company to reduce its capital using the solvency statement method under ss 642-44 CA06 in relation to redeemable shares? This would seem to be an easier route than redeeming shares from capital under s 714 CA06 (avoiding auditors report, public notices and timing restrictions).
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?
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.
Following a reorganisation of share capital (which created deferred shares), is it possible to cancel these shares without resorting to a share buyback or reduction of capital (given that the shares are effectively worthless i.e. no voting rights or dividends, etc)?
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?
I am acting for a private company in which there are 4 directors and these 4 directors own just under 90% of the shares (2 of them own less than 1% put together and other two own approx 60% and 30% respectively). Therefore reminder of shareholders hold just over 2%, but there is a substantial number of shareholders. The directors wish to pass an ordinary resolution to allow an asset to be charged. What is the simplest and quickest way to allow this transaction to be carried out?
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
Is there a specific legal provision which allows a company with a registered name ending ".. public limited company" to use the abbreviation "plc" on its website, comms, etc? Companies Act S 82 says “The regulations [ie making provision for companies to display/state specified information] may provide that for the purposes of any requirement to disclose a company’s name, any variation between a word or words required to be part of the name and a permitted abbreviation of that word or those words (or vice versa) shall be disregarded. However, the Trading Disclosures Regulations (and as amended) made under s82 don't seem to do that? Para 3(a) of Sched 2 to the Company and Business Names (Miscellaneous Provisions) Regs 2009 (made under s57, etc) refers but does not seem to link back?
I have a company incorporated under the Companies Act 1985 with '85 Act Mem and Arts. The Articles contain the usual authority allowing the allotment of relevant securities up to the authorised share capital amount for five years. This time limit has now expired and we need to grant EMI Options. Whilst I understand that the CA 2006 allows for allotment without authority under s550 or s551 of CA 2006 in the case of employee share options this I assume is subject to any restrictions in the Articles so do I amend the existing Articles to amend that authority so that the time restriction is lifted or remove the entire article giving the authority (the client knows they ought to adopt 2006 Articles but we are not there yet)? I assume that either way it needs to be a special resolution - is there precedent wording on PLC for this?
Can directors be given the discretion (in the articles of association) to allocate different levels of dividends to different classes of shares without the need to stipulate, in stating those class rights in the articles, what level of dividend those shares may be entitled to?
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 holding company pass a special resolution by way of a written resolution to reduce the share capital of its wholly owned subsidiary? Is there an equivalent to section 695 of the Companies Act 2006 in relation to a reduction of share capital?
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.
Please can you list the documents that must individually be signed by the board of a listed company in connection with the approval of its annual report and accounts. I understand these to be: the balance sheet; the directors' report; the corporate governance statement (if set out separately from the directors' report); and the remuneration report.
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?
In your standard Tag-Along rights document the event trigerring the tag-along rights is described as follows: " in one or a series of related transactions, one or more Sellers propose to transfer any of the Shares (Proposed Transfer) which would, if carried out, result in any person (Buyer), and any person Acting in Concert with the Buyer, acquiring a Controlling Interest in the Company." Does it mean that the Buyer in this context may be any other shareholder? If there are several Buyers acting in concert which of them shall make an offer?
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?
Is it possible to hold a general meeting to pass a resolution to re-register a public company and a private company (in circumstances where CH would need to wait 28 days to register the re-registration) and in the same general meeting pass a resolution that, conditional on the re-registration taking effect, the company's share capital is reduced (by way of solvency statement). Query whether the requirement to file the statement of capital within 15 days and the provision preventing passing a resolution to reduce capital effective at a later date would prevent this.
Should the company registered address and the vat registered address be the same in all circumstances for a UK incorporated company? Should a company display their registered address and registered number on an invoice to a consumer?
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?
I have a query in connection with Public Limited Company and Treasury Shares. If a PLC holds treasury shares and delists from the stock exchange - are these shares automatically cancelled? If the PLC relists on another exchange do the treasury shares carry over? Many thanks for your assistance.
Is PLC aware of any additional guidance for directors on what constitutes a reasonable basis for making a solvency statement other than the CLLS and ICAEW guidance? In particular, any guidance on relevant factors for directors to take account when making a solvency statement when a potential sale is being considered (ie in light of the 12 month aspect to the solvency statement). Thanks.
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.
Some clients of mine are setting up a JV that they will hold 98% of shares and two other individuals will hold 1 % each. One of the individuals used an agent to form the company but gave the agent the wrong name for my client. They are proposing to remedy the situation by filing an Annual Return immediately with the correct name of my client. Assumming the person who made the mistake writes a letter explaining the error I had thought this would be ok but now am thinking there could be problems. Have you ever come across this? I would be grateful for any thoughts you may have.
Do you have a precedent Hive Down agreement? I am dealing with a matter which does not involve insolvency of any party but if you only have a precedent in the context of insolvency I presume it can be adapted. Thank you for your assistance in advance.
Please could you let me know what Companies House filings are required for this Written Resolution our client is passing to alter its share capital. I looked at the above PLC document which mentions the SH08 but it was not clear if it applied to this situation: Written Resolution 1 THAT subject to the passing of resolution 4 below [adoption of new artciles]: (a) each of the 1,000 issued ordinary shares of 10p issued to Mr A in the capital of the Company be and are hereby redesignated as an A ordinary share of 10p each in the capital of the Company having the rights and being subject to the restrictions set out in the articles of association adopted pursuant to resolution 4; and (b) each of the 25 ordinary shares of 10p in the capital of the Company issued to B, each of the 10 ordinary shares of 10p in the capital of the Company issued to Mr C and each of the 15 ordinary shares of 10p each in the capital of the Company issued to Mr G be and are hereby redesignated as a B ordinary share of 10p each in the capital of the Company having the rights and being subject to the restrictions set out in the articles of association adopted pursuant to resolution 4."
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?
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?
Please could you confirm whether you agree with the following examples on amendment of articles and entrenchment? 1) The Articles are silent on the method by which they can be amended. Companies Act default provisions apply: special resolution (and class resolution if it affects class rights). No entrenchment. 2) The Articles specify they can be amended with a special resolution and class consent of the B shareholders, being 75%. BIS have not expressed a view but this may be a provision for entrenchment because it requires more than a special resolution. The alternative view is that it is not entrenchment because a special resolution and class consent is the default provision under the Companies Act. 3) The articles specify that they can only be amended with Investor (B shareholder) Consent. Same as above unless 'investor consent' requires a vote in favour by more than 75% of the B shares (eg unanmious) in which case there is entrenchment. 4) The articles specify they could only be amended by 76% voting in favour. This is a provision for entrenchment. A provision for entrenchment can be adopted by special resolution, at least for now. s22(2) requiring unanimous consent or adoption on incorporation is not in force. This is because arguably a provision in articles which requires class consent (like examples 2 or 3 above, common on a JV) could amount to entrenchment and would require unanimous consent to introduce it which would be more onerous than was inte
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).
If a company with one class of shares spread across 4 shareholders wished to create alphabet shares (A ordinary, B ordinary, C ordinary and D ordinary) which rank equally on capital and voting but allow the directors to declare different dividends on each of the proposed 4 classes of shares, can the company simply obtain approval from holders of 75% of the shares on the basis that it is the rights to the ordinary shares that are being varied (and the orindary shares as they stand are one class) and or will approval be required from 75% of the holders of each proposed class? In the current situation there is a 5% minority shareholder who may object (and could also have a s994 action) so the question is whether the minority shareholder's consent would be required.
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 am updating the constitution (articles of association) of a company limited by guarantee which is a charity I have looked on PLC and wanted to check the following 2 points: 1 Our client wants to permit the members to elect other members rather than have the directors approve the new members. The members do not mind the directors administrating the process but do not want them to prevent a person becoming a member if they have been elected by the other members. Is this possible? I assume "yes" because this is a contractual arrangement between the members and the company limited by guarantee. Please can you direct me to any PLC information which confirms this right of the members to elect other members? All I could find was the document entitled "Companies limited by guarantee" under the section "Membership of guarantee company" states that: "The model articles for private companies limited by guarantee require each member to be approved by the directors and for prospective members to fill out a membership application form (article 21). An application form may be better than relying on the signature in a register of members, particularly where there is a substantial membership. The articles may provide for an enrolment fee to be paid on joining and/or an ongoing membership fee payable at regular intervals. Such membership fees may be a useful way to generate income. Unlike a company limited by shares, a company limited by guarantee is not under an obligation to iss
Am I correct in thinking that a share sale agreement cannot transfer the legal title to shares, as this can only be effected by a stock transfer form, in a form specified by legislation (The Stock Transfer Form Act 1963?)? If so, what is the present legislation setting out the form of stock transfer form?
I would be interested if you have any info or thoughts on a scenario where a company issues shares to employees on the basis of a letter which provides that if the employee leaves before x years have elapsed a proportion of the shares that were issued to him will become forfeit. It seems to me that one might equate the requirement to work for x years to be part of the consideration and therefore if the employee leaves before the expiry of x years there is a failure to pay the consideration and therefore the shares can be forfeited. In some scenarios I have seen the above combined with a requirement to transfer shares to Shareholders x and y if the employee does not work for the x years but this can be difficult to enforce unless one also takes a power of attorney or other authority to execute a transfer on behalf of the exiting employee. Any thoughts you might have on this would be much appreciated.
I have a question regarding the Companies Act 1985. Section 143(3)(b) of this Act provided that a company could purchase its own shares when this constituted an "acquisition of shares in a reduction of capital duly made". I have no idea what this means and what type of situation this was supposed to encompass. Section 143 (3) (a) laid down many specific procedural requirements which had to be adhered for a company to enter a buyback agreement - broadly the equivalent of Part 19 of the Companies Act 2006 today. But what did Section 143 (3)(b) except from the prohibition?
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?
I have a question concerning the closure of an overseas company UK establishment. I understand that if such branch/establishment is closed form OS DS01 must be filed with Companies House. Are there any other filing requirements? For example are any filings required with HMRC?
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 am preparing form OS IN01 for a Belgian Company opening an establishment in England. There are 3 (Belgian-based) directors. Can these also be listed as the permanent representatives, or is the company required to name a UK-based person? The regulations do not make it clear whether there is an obligation to name a permanent representative. Thanks for your help.
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?
I have two 50/50 shareholders, who planned on entering into a cross option agreement to enable them to buy the others shares in the event of one of them dying. However, they can no longer do this because one of the shareholders is unable to get the appropriate insurance cover. Can you suggest any alternative options here or how this could be dealt with? The aim is to find a mechanism whereby the deceased shareholder's family will be able to receive value for the shares as soon as possible after death and the other shareholder assumes all or most of the company's shares.
If a company changes its name, is it legally obliged to send a letter to customers, suppliers etc to inform them of this change? If such a letter is sent and it later comes to light that the name in the letter is mis-spelled, must the company send out a further letter advising of the error?
We act for the administrators of a company. We now wish to change the name of the company. Our understanding is that, notwithstanding the fact that the company is in administration, the change of name must still be approved by a special resolution of the members. We would be very grateful if you could confirm if this is correct or if there is any way that the change of name can be carried out by the administrators without the approval of the members.
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?
I have a query about a mutiple completion buyback contract - i.e. a single unconditional contract for the sale of all of the Vendor's shares but with completion occurring on successive dates. My query is threefold:- 1. Whether or not this transaction is permissable under Company law and if so, whether my analysis of the legal and tax implications are correct thereof. 2. What cash and profits requirements apply to this proposal. 3. Do you have a precedent agreement? Dealing with points 1 and 2:- 1. My analysis of the legal and tax implications of the single contract with multiple completions in relation to the requirements of company law and sections 1033 – 1047 CTA 2010 is set out below:- (a) The 2006 Companies Act prohibits a buyback with payment of the consideration in instalments. However, where the buyback is effected by a single unconditional contract under which a vendor disposes of his beneficial interests in full at the outset, but with completion taking place on different dates in respect of different tranches of shares, there is no infringement of the provisions of the Companies Act. (b) By entering into an unconditional contract for the disposal of shares the vendor disposes of his entire beneficial interest in the shares subject to that contract. There will be a specific term in the contract which provides that the vendor relinquishes his rights as shareholder in relation to the shares sold on completion, notwithstanding the fact that completion take
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 am looking into the government's proposed reforms to executive pay. I note that the government recently announced further changes to the Enterprise and Regulatory Reform Bill 2012-13 which will be used to implement the reforms. I wanted to know if the proposed reforms will delete s.439(5) of the Companies Act 2006 (the provision that prevents a person's entitlement to remuneration being conditional on shareholder approval)? And if so, where this is stipulated?
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.
What is the position where the directors of a company cannot approve the annual accounts, e.g. where they were not directors during the period to which the accounts relate and so do not know whether they provide a true and fair view?
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
I am currently drafting a shareholders' agreement. There are 3 shareholders who want profits to be split between them 60/30/10. However, on sale, they wish the sale proceeds to be divided between them 70/20/10. We understand that, if the articles of association are silent on a distribution of net proceeds of a company on sale, such proceeds are distributed to shareholders pro-rata according to their shareholding in the company. The shareholders do not wish to have two different classes of shares. Is it possible therefore to draft a provision within the shareholder agreement to state that either: (a) even though the shares are split between the 3 shareholders at a ratio of 70% to A Shareholder, 20% to B Shareholder and 10% to C Shareholder, their split in the profits is actually 60% to A Shareholder, 30% to B Shareholder and 10% to C Shareholder; or (b) even though the shares are split between them at a ratio of 60% to A Shareholder, 30% to B Shareholder and 10% to C Shareholder, their split in the sale proceeds is actually 70% to A Shareholder, 20% to B Shareholder and 10% to C Shareholder? I look forward to hearing from you.
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?
It appears some organizations, at their annual meeting, ask shareholders to vote on a blanket ratification of all acts of the board (e.g. an annual resolution ratifying all acts of the board for the preceding year)? My questions are: 1) how common are these blanket ratifications, and 2) why are they done (i.e. what purpose do they serve)?
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.
If, for example, a company's articles provide that the minimum number of directors is 5, what are the consequences of only having 4 directors? Are decisions made by the directors invalid due to an improperly constituted board?
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!
Can a company waive a provision in its Articles (in this case an article which deals with how assets are distributed on a capital reduction) by special resolution if the waiver is just to apply on a one-off occasion, rather than on all occasions going forward, or would we need to alter the Articles and file the new set at Companies House?
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?
I have an unusual query in relation to the appointment of new directors in a Private Limited Company limited by shares where the sole director and shareholder has died. Other members of our firm have been appointed as Executors under the deceased’s Will. The Company was incorporated under the Companies Act 1948 and has bespoke Articles (i.e. the Regulations in Part 1 of Table A of the First Schedule to the Act are excluded except where they are expressly stated to apply). Under the Articles it states that the Directors of the Company shall not be less than two. It would appear that the Company has been operating for some time in express contravention to the Articles, however it is also now in breach of the Companies Act 2006, as there must be at least one director who is a natural person. I understand that the deceased’s shares will automatically pass to the Personal Representatives, who are not required to register as members in their own right prior to any transfer to the beneficiaries (albeit any transfer will be subject to the restrictions in the Articles). Unfortunately this appears to be a catch 22 situation, since there is no Board at which a director can be appointed and there is no director to call, give notice etc of a General Meeting (GM) at which an ordinary resolution can be passed. However, the Articles expressly include Regulation 49 which states that an GM may be requisitioned by any two members of the Company. This use to be governed by s.
Can a director appoint an attorney to carry out his functions as a director? Your note on power of attorney 7-202-3505 clearly suggests that he can but I have come across a passage in Gore Browne that : "The office of director is a personal responsibility and can only be discharged by the person holding that office, except to the extent that the company’s articles make special provision." and thus "the power to act as director cannot be delegated under a power of attorney: Mancini v Mancini (1999) 17 ACLC 1,570, SC (NSW)". Commonly the articles make provision (eg Table A art 71) for the directors to appoint persons as agents of the company by way of power of attorney. But here the director is appointing an attorney to act on his behalf in his capacity as director eg to sign the responsibility statement. I am unclear as to whether this conflicts with the Gore-Browne position. What is your view?
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?
Regarding a private limited company limited by shares (incorporated under Companies Act 2006) with model articles. The sole director resolved at a board meeting to allot shares, despite the quorum requirement not being met. I appreciate that under the model articles the director can usually only act for the purpose of appointing further directors or calling a general meeting so that shareholders may appoint further directors, and all other proceedings are usually invalid. The cheque for the shares has been paid into the company’s bank account. The resolution at the board meeting was invalid due to the meeting being inquorate, but is the share allotment still invalid, in light of the payment taken? At what point does "allotment" actually take place? When specifically does the shareholder acquire the "unconditional right" to be entered in the company’s register of members as holder of share(s)? Is it the case that, under the model articles, the company will either have to appoint further directors and hold a properly quorate board meeting to resolve the share allotments, or amend the articles to remove the quorum requirement?
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?
I am looking for a model trustee or nominee agreement whereby one corporate shareholder assigns its right to receive dividends to its parent/holding company. English law applies. Do you have a sample on the website?
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?
Share buy-backs: where a written resolution approving the terms of an off-market share purchase refers to "the agreement attached" (in order to comply with the requirements for the members to approve the agreement and the agreement to be circulated to the members), does that mean that the agreement should be filed with the resolution because it has (effectively) become part of the resolution? We haven't seen the point taken (yet) by the Companies House but would be interested in your views.
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?
Could someone please assist in obtaining the following document: (i) The most up to date Articles of Association for a Private Limited Company incorporating the 2006 Act; (ii) Has more than one class of shares i.e. A and B class of shares, this would arise, typically in a Joint Venture deal.
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
I am hoping that you will be able to assist me with the issue below. Currently the Company has 100 ordinary shares. There are two shareholders each holding 50 shares. We want to change this to one having 50 A ordinary share and the other 50 B ordinary shares. The plan is to convert these from the original 100 shares so there will be no new shares issued. The rights will be identical before and after the changes. I am aware that we will need to produce new articles and a written resolution adopting the articles and converting the shares. There is no change in the capital of the company so presumably no statement of capital is required. Are there any filings required?
I am looking at a share buy back by a private company from distributable profits. The accountants/tax advisers have applied for and obtained tax clearance from HMRC agreeing largely capital treatment for the sale proceeds. They have also prepared a draft sale and purchase agreement as a single contract providing for multiple completions of purchases of tranches of the shares over a ten year period ie it is effectively a phased purchase arrangement. We have been retained to draw up security for the seller in the form of a second charge which will rank after the company's bank. The draft contract states in terms that beneficial ownership of the shares will transfer to the company on execution of the contract and the vendor will lose any share rights (dividends, distributions, votes etc) immediately notwithstanding that Completion of the sale and purchase of the various tranches of shares does not take place until the dates specified in the table of completions over the 10 year period. I am concerned this arrangement could fall foul of S 691(2) CA 2006 and risk the contract being void or illegal with unfortunate consequences. I have suggested that a way round the problem would be for the whole of the purchase consideration to be paid up front and then the bulk of it loaned back to the company by the vendor and repaid over the deferred period; this would certainly facilitate a clearer security arrangement from the vendor's point of view. However, I am told this would
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.
Where a shareholder of a company (holding more than 5% of the shares) is requisitioning frequent general meetings for vexatious reasons and to create problems for the other shareholders and directors (for example raising issues which have been discussed at quarterly meetings and requesting specific documents provided to the board), is there a way of preventing the shareholder from doing this? We are aware that section 303(5) Companies Act 2006 states that a resolution may not be properly moved at a meeting if it is frivolous or vexatious, but is there a way of preventing the shareholder even calling a meeting if it is for nonsensical reasons? Furthermore, can the company pass a resolution noting that the shareholder has certain rights to information under statute, articles and contract but confirming that the board of directors and not the shareholders are to be the final arbiters of what information is provided?
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?
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?
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?
If a number of share buybacks from various shareholders have been approved by written resolutions and one shareholder changes their mind after the passing of the resolutions but before the contract is completed, are there any issues with this and does any notification have to be given to the shareholders who have passed the resolutions?
I am dealing with the removal of a director under section 168 of the Companies Act 2006. The company has 2 directors and 2 shareholders (who are the same people). One holds 65% of the shares and the other 35%. The 65% shareholder wishes to remove the 35% shareholder. The directors failed to call an EGM so the 65% shareholder has convened one himself. It is unlikely that the 35% shareholder will attend. The Articles state that a quorum at general meetings is 2 shareholders therefore at the general meeting it would seem that the 65% shareholder cannot pass the ordinary resolution. The 65% shareholder cannot transfer any of his shares as the share transfer cannot be approved by the Board. The Articles cannot be altered as we do not have a 75% majority. It would seem inequitable if a 35% shareholder could frustrate the statutory procedure which only requires an ordinary resolution to remove the director in question. Am I missing something here?
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.
The directors of a company have declared an unlawful distribution of dividends. I understand that under certain conditions the distribution must be repaid by the shareholders/directors if they had the requisite knowledge that the dividend should not have been made. In this case the directors and shareholders are the same. The directors have previously lent money to the company and so can the repayment of dividends be set off against the amount that the company owe the directors under the loan?
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.
On a share buyback (off-market), are there any restrictions on a party entering into a loan agreement with the Company in which it is acknowledged that the sums loaned to the Company are to be used for the buyback itself?
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.)
The general questions I am mulling over are: a) Can an existing company pay for the shares in a newco to be issued in the name of the existing company’s shareholders? b) Can shares in a newco simply be issued without the express consent of the shareholders of the existing company? (There are no drag along rights in the existing articles). We are acting for a plc, which is in the process of seeking investment to develop the technology/IP that it has a licence to exploit. For genuine business reasons, the directors wish to “start afresh” with a new company mainly so that there is no connection on the company books with a certain previous director, which they have good reason to believe has been putting off investors. The simplest option of just setting up a subsidiary and getting investment into that rather than the existing company is not a viable option for a whole host of reasons. The wish is for the newco to exactly replicate the existing company, but one of the problems is the fact that there are 197 shareholders, some of whom never respond to notices/correspondence and so are unlikely to respond to anything that is sent now. Long-term, it would seem that this would all be in their best interests as otherwise the existing company will simply fold and the IP licence fall away. The existing company is EIS registered, but newco would most likely not be (the EIS implications are a completely separate matter to be considered of course!). The licence (the o
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.
I can't seem to locate any triggering requirements for when a US company is required to register a UK establishment (as opposed to simply using a UK affiliate as an appointed agent to conduct its business).
The Companies Act 2006 provides that Share Premium Account and Capital Redemption Reserve can be treated in the same way as ordinary share capital for the purposes of a reduction of capital. Can a Revaluation Reserve not be dealt with in this way? Could a bonus issue be made and then the shares form part of a reduction of capital?
Section 644(4) of the Companies Act 2006 states that the resolution approving the buyback does not take effect until the solvency statement and statement of capital are delivered to the Registrar. In your view does this mean that the reduction is effective from the date of lodging at Companies House or would this be backdated to the date of the special resolution? Can the reserve arising on the reduction be paid to the members prior to the reduction being lodged with the Registrar (but after the passing of the special resolution)?
I am currently advising on a share buyback. The company does not have sufficient distributable profits to purchase all the shares and the advising accountant is proposing an “unconditional contract with multiple completions”. These future completions would be subject to distributable profits being available. Consequently, I have two concerns: 1) Would the Company entering into such a contract breach the Companies Act provisions in respect of a purchase being out of distributable profits and paid for in full at the time of purchase? 2) If such a contract would not breach the Companies Act, I understand that it would involve the seller disposing of his entire beneficial interest in the shares and no longer being able to exercise any rights in respect of those shares. If the company did not then have the funds to purchase the shares at the proposed completion date, presumably they remain in “limbo” until such time as the company does have such funds? What is would the technical position be? The shares would exist at Companies House, but not, in practical terms be available for sale or other transfer, and even if so, they would have no value as only legal and not beneficial ownership remained. I should be grateful for any guidance you may be able to offer on the above.
We have a private company with upwards of 80 shareholders all with historical family ties. The vast majority of the shareholders have little or no part of the day to day running of the company. Within the articles of association there are clear provisions to deal with the process of transfer of shares. In the event that a shareholder wishes to sell his/her shares they must first be offered to the other shareholders on an open basis. The transfer shares are then subject to a bidding process from other shareholders. The question is whether a director of the company, who is also a shareholder, is required to provide information to the other shareholders as to the reasons for submitting a bid in excess of other shareholders bids. The fundamental issue being that the director has greater knowledge of the commercial aspects of the company and therefore the potential future value of the companies shares.
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?
If a company has failed to file an SH01 reflecting the allotment of the shares, what would be the implication on any company or individual purchasing those shares and have those shares been issued correctly?
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
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)?
I am looking for a precedent for a distribution agreement for use in an indirect or three-cornered demerger as described on the following webpage on your Corporate section : http://corporate.practicallaw.com/4-366-8006. The client's accountant has already obtained HMRC clearance for the distribution under Section 1075 CTA 2010 and we have been instructed to prepare the agreement and resolutions to implement the demerger - do you have these documents on your website? I shall be grateful for any suggestions as to where to find these?
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".
I came across a company that on or about the date of filing a resolution on a change of name also filed a copy of its old articles of association (containing the new company name of the front page). The resolution deals only with the change of name and there is no mention of adoption of the new articles; the articles were filed on their own and are a copy of an old set of articles (that were amended prior to the change of name above). Under section 21 of the 2006 Act, the articles may only be amended by a special resolution. Therefore, filing to Companies House alone should not be deemed as the adoption of new articles? Is it best to file Form RP01 with the correct copy of the articles to rectify this?
I wondered whether you might be able to confirm my understanding of what happens when a limited company incorporated under the 1985 Act changes its articles, or perhaps point me in the right direction on PLC. My understanding is that, on or after 1 October 2009, where a limited company incorporated under the 1985 Act files amended articles (without attaching the memo) and states that such amended articles are adopted to the exclusion of the existing articles, then the provisions of the memo that would otherwise be deemed to be part of the articles under the 06 Act are effectively deleted from the newly adopted articles. If the newly adopted articles did not include the standard line stating that the liability of the members is limited, then the company effectively becomes an unlimited company. In a slightly different situation, where the same limited company incorporated under the 85 Act changed its articles (again omitting the memo and stating that the amended articles are adopted to the exclusion of existing articles) in March 2009, then my understanding is that the previous memorandum would remain a part of the company's constitutional documents. If the articles were then left unamended since that date, the provisions of the memorandum would (after 1 October 2009) be deemed to be part of the relevant company's articles and remain in existence.
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?
Section 254(6) of the 2006 Act is confusing me. I have a situation - Company A is entering into a transaction with Company B. A director of Company A is sole shareholder of Company B. I am assuming Company B is "connected" with the director and hence the transaction requires approval by shareholders of Company A under section 190. Is 254(6) just to deal with aggregation of voting rights ?
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.
It appears that the directors of a company have been declaring dividends for a number of years but have not maintained board minutes relating to the same. Are these dividends deemed to be unlawful distributions? If they are so deemed, how can this issue be remedied?
We are advising a client in relation to the purchase of own shares. According to section 691 of the CA 2006, we understand that the price for the shares must be paid for on purchase. The client has already paid a significant sum of money in relation to the purchase of the shares without any contract being in place. The client would like the contract to be drafted stating the full purchase price payable for the shares, that some monies have already been paid and that the balance of the monies due to purchase the shares is paid on completion of the contract, i.e. when the shares have been purchased. We have also looked at the case law in relation to this issue however we can only find authorities in relation to payment of the purchase price in instalments after completion of the purchase and we know that this is not permitted under the CA 2006. We would like to know whether or not it would be considered to be unlawful under the CA 2006 for the purchase of own shares to be completed in this way (i.e since monies have already been paid, for the balance to be paid on completion) and therefore if the contract would be considered to be unenforceable. We think that what the client proposes is unlawful. Do you agree?
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?
Is it correct to assume that sums held in a company's share premium account are treated as positive net assets on a wind-up of that company and are distributed to the shareholders, notwithstanding the fact that such sums in the company's share premium account would (prior to wind-up) be treated as non-distributable reserves under s.610 CA 2006? There are no creditors of the company in question.
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?
I am acting for a company that has previously received a loan from a shareholder. The loan remains outstanding in full. It has now been agreed to convert the loan into ordinary shares, the conversion price for which has been agreed by all interested parties. What is the correct procedure for achieving this? Is it sufficient simply to pass a shareholder resolution stating, say, that the loan of £x be converted into y ordinary shares of £1 each. If this is correct, have the shares been allotted for cash or non-cash consideration, as this is relevant when completing Form SH01? I'd be very interested in your views.
I should be grateful any experience you may have had regarding the application of the Duomatic principle in the context of the creation of new share rights, and whether share rights must be contained in articles of association. The circumstances are: a client company believes that it had redesignated its existing ordinary shares into A ordinary shares and alloted new B ordinary shares (part of this as a bonus issue) from a certain date. An annual return has been filed reflecting this (and summarising the share rights), the only difference between the classes is that the A shares have a right to a priority distribution on a return of capital. However no new articles were adopted and no resolutions or forms were filed with Companies House. My initial thoughts are that:- 1. Provided it is verifiable that all the members assented to the redesignation and allotment, the Duomatic principle would apply notwithstanding the failure to pass the requisite authorising resolutions in accordance with the Companies Act. The case law re the limits on the Duomatic principle would seem to suggest that the principle cannot apply where the relevant provisions of the Act are required to protect third parties, as opposed to the shareholders. Provided that the company had reserves for the bonus issue, it would not appear that any third party interests would have been affected by the variation and allotment. 2. The main obstacle is whether share rights were validly created without
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.
I have a client company who would like to allot shares in one tranche but with payment staggered over a period of time. Do you have a suitable agreement for this and are there any issues to watch out for?
A company's articles of association provide subject to the Companies Act as amended, re-enacted, modified, for written resolutions of members to be unanimous. The company wishes to use a written resolution to pass a special resolution to change the articles to increase number of directors. The Companies Act says a special resolution only requires 75% -does this take precedence over the unanimous requirement in the Articles drafted before the 2006 Act?
If a Company is left without any directors or shareholders, because both have died (and were the same people) and the company's articles and table A to do not provide for this, does the company have to get a court order to appoint a director to deal with its business? If so, how does it go about this?
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?
Section 549 of the Companies Act 2006 generally provides that the directors of a company must not exercise any power of the Company to allot shares or grant rights to subscribe for shares without authorisation by the company (save for a private company with a single class of share). Section 549 (2) provides an exemption where the allotment is in pursuance to an "employees' share scheme". Section 1166 defines "employees' share scheme" as a scheme for encouraging or facilitiating the holding of shares of the company for the benefit of the bona fide employees or former employees of the company. Will a share option scheme for the benefit of employees and non executive directors benefit from this exception (particularly when the non executive directors are the initial persons to be granted options under the scheme) or will the grant of options to non executive directors under such scheme require shareholder approval?
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.
I note the comments in the above referenced drafting note state that "...it is not thought that section 643(1)(b)(i) of the CA 2006 is intended to capture a striking off of a company...." Therefore, if a company is undertaking a capital reduction immediately prior to applying for a voluntary strike off (and intends to make such an application at the time it undertakes the capital reduction), which solvency statement (as per s643 (1) (b)) should its directors make? Our thinking to date has been that it is more representative of the ultimate intention for the company to cease to exist (regardless by what exact method) to make the statement in 643(1)(b)(i), even though technically a strike off is not a “winding up”.
Have you had any response from the Department for BIS to the point you raised with them about the inconsistency between the wording of sections 687(3) and 692(2) CA 2006, as referred to in the practice note on Redeemable Shares?
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?
A client needs to replace some of its ordinary shares with redeemable shares. Following advice in Practice note, Redeemable shares, we wish to do this by a buy-back under Ch4 of Pt 18. It has negative distributable reserves and wishes to avoid the costs of a buy-back out of capital. We wish to effect the buy-back out of the proceeds of a fresh issue of shares. In effect, we wish to issue the same number of new Redeemable Shares and use the proceeds to buy-back the equivalent number of Ordinary shares. However, we want to do this cashlessly: and not ask the shareholders to put up fresh cash, that is repaid to them the same day. Funding such circular cash would be inconvenient. We cannot see a specific provision requiring cash to transfer. Can this be done cashlessly?
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.
A client needs to replace some of its ordinary shares with redeemable shares. We wish to do this by a buy-back under Chapter 4 of Part 18 (Companies Act 2006). It has negative distributable reserves and wishes to avoid the costs of a buy-back out of capital. We wish to effect the buy-back out of the proceeds of a fresh issue of shares. In effect, we wish to issue the same number of new redeemable shares and use the proceeds to buy-back the equivalent number of ordinary shares. However, we want to do this cashlessly and not ask the shareholders to put up fresh cash, that is repaid to them the same day. Funding such circular cash would be inconvenient. We cannot see a specific provision requiring cash to transfer. Can this be done cashlessly?
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?
I read in your Practice note, Redeemable shares "Alternatively, the company could cancel its non-redeemable shares and replace them with a new issue of redeemable shares". Is the only way to cancel shares envisaged by this paragraph a reduction of capital?
I am wondering if I could have your thoughts on the following. I act for a company. Last year (before I began acting!), a shareholder left the company (it was not a happy departure). Before leaving, he executed a stock transfer form transferring the shares held by him in the company to the company for "nil" consideration. My understanding is that this would fall within section 659(1) of the Companies Act 2006: the company has acquired its own fully paid up shares otherwise than for valuable consideration. Assuming this to be correct, then I am unclear as to what notices should have been given to Companies House, etc. as presumably the shares acquired by the company are now cancelled and this should be recorded. However the requirement for a return to be made to Companies House under section 707, CA 2006 relates only to purchases made pursuant to "this chapter". Section 659 does not fall within "this chapter".
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?
I am trying to structure a share buyback for a client where the company has insufficient funds to pay the full consideration on day one (pursuant to section 691 CA 2006). Rightly or wrongly, the conventional away around this dilemma historically has been to have a separate loan back to the company by the seller. My client is not keen on this option, nor are they keen to dispose of the shares in tranches resulting in them having diminishing control in the company. Given the above, is it possible to structure a share buyback with a form of split exchange and completion so that the company makes interim payments on account of the purchase which (simplifying matters somewhat) is then completed when all the instalments have been paid? Presumably the document would need to factor in scenarios where all the instalments are not received (i.e. seller could have the option to either terminate or sell a pro rata amount of shares at that stage) or if they have all been received but the company technically has insufficient reserves to complete.
I have a client who has issued xx ordinary shares to a shareholder. However, the shareholder has not paid for the shares but was issued, at the time, with a share certificate stating that the shares are fully paid. The shares are now subject to forfeiture and the procedure is set out in the company's articles of association. However, I am not confident that the shares can be forfeited if the shareholder was issued with a fully paid up share certificate. Can you help?
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?
Do shareholders have a right to review / inspect board meeting minutes?(I note that the Companies Act is silent on the issue and I could not find any case law.) Also, who else, if anyone, has a right to inspect the board minutes?
I have spent some time looking into the redomiciliation of a company, in particular with regard to a company incorporated in the Isle of Man which seeks to redomicile to the UK. It is not a large company, and owns just one property. I have not been able to find any express statutory provision permitting redomiciliation to the UK and I wonder whether you have come across any. In the absence of any express legislation, are you aware whether redomiciliation is permitted? Any guidance would be appreciated. A lot of the information I have found concerns redomiciliation out of the UK and would seem to suggest that it is possible but I am struggling to find conclusive information concerning the reverse situation.
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
I act for a minority shareholder of a private limited company. My client was removed as a director by the majority shareholders 2 weeks ago. They are refusing to provide him with quarterly accounts, year end accounts and bank statements on the grounds that he is no longer a director of the company. Is my client entitled to the documents as a shareholder? If he is, can you please refer me to the relevant legislation/case law?
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?
Does "fair value" of share which is to be determined by an expert on a shareholder being required to offer his shares (which comprise a minority holding) under a provision in the Articles of a company imply that there shall be no discount applied to reflect the minority holding. The provision is silent on whether or not a minority discount will apply. The valuation is on the basis of a willing buyer and seller.
I am looking for information on how to effect a share split in a UK limited company, such that the number of authorised share capital of the company would increase by 4x. I see the note regarding subdivision of nominal share capital but it seems that this just addresses the nominal share capital, but we want to change the actual number of shares. Can you please advise/assist? Thank you.
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 act for two individuals who own a building which is to be redeveloped. The individuals propose to form a company and the building will be transferred to the company on a 125 year lease. The individuals will own all of the shares between them on an equal basis. The Bank has agreed to finance the company to enable th development of the building to take place. The individuals owe other debts to the bank in their personal joint capacity. The bank is proposing to include within its mortgage offer a clause whereby all of the proceeds of the sale following the development of the building less build costs, legal and estate agents charges are forwarded to the bank. The monies will initially be used to discharge the loan to the limited company. Can they be used thereafter to defray the personal debts of the clients to the bank?
I act for a minority shareholder (15%) in an English limited company.There are 3 shareholders in total and the other 2 are also directors. The shareholders are party to a shareholders' agreement dated xxx. Recently the other 2 shareholders passed an SR changing the existing articles of the company. The new articles contain many provisions similar to those in the shareholders' agreement and there are various areas of conflict between the two. The areas of conflict are much less favourable to my client in the new articles than in the shareholders' agreement. Which document prevails?
We are acting for a client in relation to preparation of New Articles. The client has asked that we change model article 21 regarding "all shares to be fully paid up" so that in the New Articles the obligation to fully pay up the shares is temporarily suspended by reference to a Shareholders Agreement (which we are also preparing). Our questions are (1) can we refer to a separate document (in our case the Shareholders Agreement) within the New Articles we are creating and (2) is there an easier way (other than preparing New Articles) to temporarily suspend this or any other provision contained in the existing Articles?
The articles say that "The Code applies to all companies with a premium listing of equity shares." I would like some clarification on what is meant by "premium listing". I assume that because listing is used that AIM companies are excluded. Essentially does it mean all companies that are listed on the Official List are subject to the CGC?
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 wondered if you had a view on the following question. Do the articles of association of a company actually need to include a provision regarding indemnities for the company to be able to give one? The Companies Act does not say that this is the case, and I've had a look at some of the conultations that took place when the Model Articles were being drafted, noting that BERR removed the provision (saying that it was not appropriate to make default provision for indemnification of directors in any of the model articles because there were so many possible variations as to what is appropriate for each company and that companies wishing to provide indemnities for directors should consider making special provision in the articles to suit their circumstances). However, the Model Articles did, in the end, include short permissive indemnity provisions. Quite an interesting one, and I would probably advise that there should be such a provision in the articles, but based exactly on what is the question.
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.
I am submitting this query to enquire whether Practical Law Company have ever experienced or been asked about the possibilty for approving the re-registration of a plc to a private company, and then the capital reduction by directors solvency statement (available only to private companies) in the one general meeting.
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.
I am considering a set of Articles which adopt the old Table A Companies Act 1985. They disapply Section 89(1) and 90(1) to (6) of the Companies Act 1985 (statutory preemption rights on issue) in their entirety, i.e. not just for five years; is this disapplication still valid in respect of allotments which may be made in the next few days? I think the disapplication is still valid but don't know where to check this. Thank you.
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)?
When re-registering a company from a public company to a private limited company - there is the option of a same day service. This same day service is available if evidence is produced that 95% of the voters are in agreement. If this is the case, does section 98(1)(c) Companies Act 2006 not apply or what would happen if the remaining 5% of votes is made up of 50 or more shareholders who apply to court to cancel the resolution? Can re-registration still happen on the same day if you provide the 95% evidence?
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?
A client of ours is looking to buyback a number of shares owned by a shareholder. It doesn't have distributable profits at present, so we are going to do a reduction of share capital by using the solvency statement procedure. This will then create a reserve we can use to buyback the shares. My question relates to how the company's share capital will be affected by the reduction of capital. When we reduce the share capital, will this have the consequence of also cancelling shares. Or will the nominal value of the shares reduce? I am trying to complete form SH19 and I am struggling to know how to complete the statement of capital. I look forward to your help.
What is the procedure for making an amendment to a notice prior to the meeting itself? Am I right in thinking that any deletion / amendment of a resolution would likely be dealt with as follows: (1) If minor amendment / typo - send notice of amendment but not necessarily need to adhere to 14 day notice provisions ie if reasonable amount of time given prior to notice (in context of amendment) then that would be acceptable (2) If substantial amendment (which would, I think, include deletion of whole of resolution X, Y or Z (whether special or ordinary) would require full notice ie 14 days and change of date of meeting. Is there any guidance on this? Do you think these are reasonable assumptions?
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?