BLP (8)
Terms
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- What do you need to consider in the context of an 1985 Act Company?
- You need to consider the concept of authorised share capital
- What is ASC?
-
This is the maximum number of shares that can be issued in the company, operates as automatic cap
- Where does the total ASC amount appear for an 1985 company?
- It appears in the company's memorandum
- What section provides that a cap contained in a 1985 company's memorandum is deemed to have been transferred into the company's articles?
- s. 28 CA 06
- Can 06 Act companies elect to put a cap in place?
- Yes, it is therefore important to always check the company's articles
- What must authorisation under s. 551 include? (power of directors to allot shares: authorisation by company)
-
s. 551:
(a) - maximum amount of shares
(b) - expiry date (not more than 5 years) - Can a private company exclude the power to allot under s. 550?
- Yes- must check the company's articles
- What must you check documents wise in the context of issuing new shares?
- Must check if any relevant resolutions filed at Companies House, e.g. (1) OR giving authority to allot (s. 551), (2) SR disapplying s. 561 re pre-emption rights or (3) OR removing cap for CA 1985 companies.
- What allows you to determine the issued share capital?
- Company's later annual return and recent return of allotment forms.
- For 1985 Act companies, in the absence of OR to remove ASC what should you also check and why?
- The company's memorandum as there will have been a deemed transfer and therefore you need to understand what the ASC was set at.
- What document should you also check that will not be filed at Companies House?
- Any shareholders' agreement - this may contain restrictions on the allotment of shares
- Would a fixed rate non-participating preference share fall within the definition of equity securities?
- No as these are non-participating, the dividend payments are capped at the fixed rate payable in preference to the ordinary shares. Additionally, there is no right to participate in any surplus capital payments.
- If shares are capped (i.e. not an equity security), what can you do?
- You don't need to make a pre-emptive offer or disapply pre-emption rights.
- Are shares that participate to a limited extent equity securities?
- No
- If shares participate to an unlimited extent as to the payment of dividends, are the shares equity securities?
- Yes as the amount is uncapped.
- Where shares fall within the definition of equity securities, what will need to happen?
- The shares should be offered preemptively or pre-emption rights should be disapplied.
- What are the key features of [X]% cumulative participating preference shares?
- % of the amount paid by investor is paid to in preference to the other shareholders. Cumulative, accumulates annually. Participating includes in profits and surplus on windup. Preference on distribution of profits and on wind up.