| Alteration
of Share Capital |
| |
| 1.
Increase of share capital |
The
directors may exercise the powers granted to them pursuant
to s80 CA85 to issue shares in the company provided that
the company has sufficient authorised share capital. The
authorised share capital will be stated in the Memorandum
of Association of the company.
|
A
company limited by shares or a company limited by guarantee
and having a share capital, if so authorised by its Articles,
may alter its share capital by increasing its share capital
by creating new shares of such amount as it thinks expedient
(s121 CA 85). Regulation 32 of the 1985 Table A authorises
the company to increase its share capital by ordinary
resolution of the members.
|
Notification
of an increase in authorised share capital must be given
to the Registrar of Companies on Form 123 within 15 days
after the passing of the resolution authorising the increase.
Form 123 must be accompanied by a copy of the resolution
authorising the increase (s123 CA 85)
|
In
some instances, a company will want to increase it’s
authorised share capital by the creation of a new class
of shares. The rights attached to the new class of shares
can be:
|
| (i) |
included
in the ordinary resolution authorising the increase; or |
| (ii) |
attached
by a special resolution; or |
| (iii) |
attached
by a special resolution amending the Articles of Association;
or |
| (iv) |
by
some other means.
|
If
the rights are included in the resolution authorising
the increase or attached by a special resolution, then
a copy of the relevant resolution together with form 123
will need to be filed with the Registrar of Companies.
Where the rights are attached to a new class of shares
other than by the passing of a resolution or agreement
notice of the particulars of the rights attached to the
new class of shares will need to be given on form 128(1).
|
| Notes:
normally the share rights are attached by a special resolution
amending the Articles of Association. Therefore, the precedents
supplied within Blueprint are drafted accordingly. If
the rights attached to a new class of shares is by another
means the precedents will need to be amended accordingly.
In addition, if the company has shares other than ordinary
shares in issue and a further class of shares is being
created it would be advisable to check that creation of
the new class of shares would not constitute a variation
of class rights under the rights of other shares currently
in issue or that class consent to the creation of the
new shares is not required (e.g. if company has preference
shares in issue and it is proposing to create a new class
of preference shares ranking in priority to the existing
preference shares). |
|
| |
| 2.
Re-designation of share capital |
| Existing
shares may be re-designated as a new class of shares.
If a new class of shares are being created as part of
the re-designation the rules above relating to class
rights will apply. Where the rights are attached to
a new class of shares or the rights of an existing class
of shares is varied other than by the passing of a resolution
or agreement that needs to be filed with the Registrar
of Companies pursuant to s380 CA85 notice of the particulars
of the new rights will need to be given on form 128(1).
|
The
re-designation may be over authorised but unissued shares
and/or issued shares (in whole or in part). If the shares
being re-designated are unissued, then the re-designation
may be by ordinary resolution. If issued shares are being
re-designated (in whole or in part) then a special resolution
authorising the re-designation should be passed. Note:
depending upon the change in rights between the old class
and the new class of shares the change in rights may result
in what the Courts would deem a variation of class rights.
Accordingly, the procedures laid out for a variation of
class rights in the company’s Articles of Association
and/or the Companies Act 1985 will need to be followed.
While the precedents in Blueprint enable you to produce
the relevant documents, in such instance, it would be
advisable to seek legal advice regarding the re-designation.
|
| 128(4)
of CA85 states that where shares are assigned a name or
other designation otherwise than by the passing of a resolution
or other agreement which needs to be filed with the Registrar
of Companies under s380 CA85 then within one month of
doing so form 128(4) must be filed with the Registrar
of Companies. |
|
| |
| 3.
Other changes to share capital |
| A
company may also, if authorised by its Articles: |
| (i) |
consolidate
all or any or its share capital into shares of a larger
amount than its existing shares (e.g. four 25p shares
could be consolidated into one £1 share); |
| (ii) |
sub-divide
its shares into shares of a smaller amount (e.g. one £1
share could be sub-divided so as to become four 25p shares); |
| (iii) |
convert
all or any of its fully paid-up shares into stock; |
| (iv) |
re-convert
stock into paid-up shares; |
| (v) |
redeem
any redeemable shares (provided that, after the redemption,
there are non-redeemable shares in issue); or |
| (vi) |
cancel
unissued shares (e.g. by reducing its authorised
share capital from £10,000 to £5,000 by cancelling 5,000
unissued shares of £1 each) (s121 CA 85).
Note: this is not the same as a reduction of issued
share capital under s135 CA85 which must be confirmed
by the Court. |
| Notice
on Form 122 must be given to the Registrar of Companies
within one month of the passing any of resolutions referred
to above (s122 CA 85). |
| On
a consolidation of shares Regulation 33 of 1985 Table
A allows the directors to sell fractions of shares which
arose as a result of the consolidation and to distribute
the net proceeds of sale to and amongst the members entitled
to the fractions. No such provision is afforded on a sub-division.
Therefore, any sub-division must result in a whole number
of shares for each member. Notwithstanding Regulation
33, it is usually advisable for a company with few shareholders
to structure any consolidation so that no fractions of
shares arise as a result of the consolidation. |
|
| |
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