19 July, 2021
Q: I have a small private limited company, what do I need to think about before I allot some shares?
A: Below are some important points to consider when allotting new shares in a private limited company:-
The requirement to have an authorised share capital was abolished under the Companies Act 2006 (“CA 2006”), if the Company with share capital was incorporated under the Companies Act 1985 or earlier, it will have an authorised share capital clause set out in its memorandum of association stating the maximum number of shares that can be issued.
For a private limited company with only one class of shares, the directors have a general authority to allot shares (section 550 of CA 2006) of that class without requiring any further authority, unless there are restrictions in the Company's articles (or shareholders’ agreement).
For a private limited company with more than one class of shares, under section 551 of CA 2006, the directors need authority to allot new shares by either a provision in the Company's articles or by a shareholders’ ordinary resolution. The ordinary resolution can be passed either as a written resolution or at a general meeting of the shareholders.
Under section 561 of CA 2006, shares being issued have to be offered first to existing shareholders in the Company. Therefore, you should check the Company’s articles to verify whether statutory pre-emption rights on the allotment of shares have been dis-applied, the terms of any existing shareholders’ agreement will also need to be checked.
Statutory pre-emption rights can be waived by passing a special resolution of the Company’s shareholders or by including a provision dis-applying pre-emption rights in the articles of association (any changes to the articles will also require a special resolution to be passed by shareholders).
Following an allotment of shares, the Company’s register of members and register of allotments should be updated to reflect the allotment, a return of allotment (Form SH01) should be completed and submitted to Companies House within one month of the allotment and any shareholder resolution passed should be filed at Companies House within 15 days of being passed. If the new shareholder qualifies as a PSC (a person of significant control) the PSC register should be updated and the appropriate PSC form filed at Companies House. A share certificate should be issued within two months of the allotment.
If you need help with the allotment of shares or any of your compliance or governance policies generally, please contact us. All our contact details are on our website www.brucewallace.co.uk
118 Pall Mall
Company registered in England and Wales number 8254957