Buy Back of Shares and Transfer of Shares:
Maintenance of share capital:
Aveling Barford 1989: Hoffman J: ‘a company cannot with leave of court or special procedure,
return capital to its shareholders. Unauthorised return is ultra vires and cannot be validated by SH
ratification or approval.’
It must generally be maintained as it’s a fund to which creditors look for payment owed to them.
Company must not generally purchase its own shares – s658
Dividends must not be paid out of capital.
A subsidiary may not be a member of its holding company and allotment or transfer of shares to its
holding company is void.
Money paid for shares = company capital and it should not be diminished.
SH CANNOT HAND CERTIFICATES BACK TO THE COMPANY IN EXCHANGE FOR
CONSIDERATION.
To realise investment, they must SELL their shares to another.
There are exceptions:
- Reduce share capital by court consent or special resolution – ss641-648
- Buy-back s690 or redeem its own shares s684-689
- Purchase own shares under court order – s994 or ss98-99
- Return capital to SH after debt payments in winding up.
TRANSFER OF SHARES
Intro:
- Shares are transferred if the SH who owns them, sells or gives them away.
Basic procedure: pg211
1. Seller should complete and sign STOCK TRANSFER FORM which he should give to the buyer – ss770-772
CA. (No need for witness for the seller signature)
2. Seller should give SHARE CERTIFICATE to the buyer.
3. Selling for over £1000? Then buyer needs to pay STAMP DUTY (0.5% rounded up to nearest £5) on the
stock transfer form. No payment if they are a gift. Minimum that can be paid is £5.
Buy shares for £12,240 x 0.5% = £61.20 rounded up to £65
Below £1000 no stamp duty provided the certificate is completed on instrument of transfer.
Shares traded on ‘recognised growth market’ are exempt. Main example being Alternative
Investment Market (AIM).
Provided certain conditions are met it will not be charged on transfer of assets between companies
in a qualifying group – s42 Finance Act
4. Buyer needs to send the share certificate and Stamp duty under the section not chargeable if it applies. It applies
stock transfer form to the company. to any instrument which that effect is to convey or transfer ben
interest in property from one body corporate to another and the
5. Company should issue a new share certificate
bodies are associated at the time instrument executed.
in his name within 2 months - s776 and this is
the evidence of title for FSC. - Associated where one is parent of another, or both have
6. Company needs to add his name on register of same parent = it is ben owner of not less than 75% of
members within 2 months – s771 ordinary share capital. (2A) and (2B)
7. The change of composition is notified to the
Registrar of Companies on confirmation statement CS01.
Restrictions on transfer:
, - Art 26 MA = directors have absolute discretion and may refuse to place a name of the register of members.
But they must have been given this in the articles and if they do so wrongly then it can be
challenged by application to the court for order of rectification of the register – s125
There is a longstop time limit of 10 years for claims – s128.
Where they have some discretion then they must decide in reasonable amount of time = no more
than 2 months. Then they are obliged to deliver new share certificate.
If they exercise discretion and refuse, the court generally will not interfere unless proven it was not
in good faith.
If they refuse to register, there is no claim for damages for the buyer or rescission of contract.
Seller remains legal owner and his name remains on the register and he holds ON TRUST for the
buyer.
- SH may be permitted under a special article to transfer their share without restriction only to other SH and
their family.
- SH may be allowed to consider transferring to people who are not already SH only if they first offer those
shares to other SH at a fair value and they reject it.
WS15 Task: page 15 of the workshop:
How transfer of shares can be effected by the articles of association
6.2.4 = TT is not current share holder it is a TP
An offer has been received from Turbine Technology Limited
(‘TT’) to buy the shares. Advise on which provisions of 6.11 = Transfer Notice
Article 6 apply to this transfer and how this sale process
should be commenced. When Y receive it then they become Turbines agent
28 days to decide whether to take the shares.
Helpful to existing members – increase their shareholding and
give them more power
Technically can 6.11
TT is willing to pay £65 per share. Can a transfer notice be Not sure it’s a good thing practically
served on Yenlite, stating that E.Turbines is prepared to sell
the shares at £85 each (thereby discouraging existing
members from buying the shares)?
If the existing shareholders are not interested in buying the 6.16
shares at £85 per share, would E.Turbines then be free to sell 7.1 and 7.1.2
the shares to TT at £65 per share? What would be the
consequences if TT bought them for £65 per share? Repercussions to doing this.
6.12 – offer all 100,000 shares to all members at £65 each
Assume a properly drafted transfer notice is served on
Yenlite stating that E.Turbines would like to sell the shares at 6.14 – how to allocate the shares if total number of shares
£65 each. It is likely that Champion and Wind West would which accepting members (Champion and Wind West) wish to
each indicate an interest in buying all 100,000 shares. Pat purchase exceeds the number of shares available
Aston would not want to buy any. Under Article 6, how many - they each would be interested in 100,000
shares would Champion and Wind West be able to buy?
6.14.1 – proportion that its shareholding bears to the total of all
If each wants 100,000 then it is excess situation as cannot both h accepting members = 80,000
30,,000 x 100,000 = 37500
50,,000 x 100,000 = 62500
Adds up to 100,000 shares
- If there were excess then they will receive that
proportion of any remaining
What steps must be taken, and by whom, before E.Turbines 6.15
Maintenance of share capital:
Aveling Barford 1989: Hoffman J: ‘a company cannot with leave of court or special procedure,
return capital to its shareholders. Unauthorised return is ultra vires and cannot be validated by SH
ratification or approval.’
It must generally be maintained as it’s a fund to which creditors look for payment owed to them.
Company must not generally purchase its own shares – s658
Dividends must not be paid out of capital.
A subsidiary may not be a member of its holding company and allotment or transfer of shares to its
holding company is void.
Money paid for shares = company capital and it should not be diminished.
SH CANNOT HAND CERTIFICATES BACK TO THE COMPANY IN EXCHANGE FOR
CONSIDERATION.
To realise investment, they must SELL their shares to another.
There are exceptions:
- Reduce share capital by court consent or special resolution – ss641-648
- Buy-back s690 or redeem its own shares s684-689
- Purchase own shares under court order – s994 or ss98-99
- Return capital to SH after debt payments in winding up.
TRANSFER OF SHARES
Intro:
- Shares are transferred if the SH who owns them, sells or gives them away.
Basic procedure: pg211
1. Seller should complete and sign STOCK TRANSFER FORM which he should give to the buyer – ss770-772
CA. (No need for witness for the seller signature)
2. Seller should give SHARE CERTIFICATE to the buyer.
3. Selling for over £1000? Then buyer needs to pay STAMP DUTY (0.5% rounded up to nearest £5) on the
stock transfer form. No payment if they are a gift. Minimum that can be paid is £5.
Buy shares for £12,240 x 0.5% = £61.20 rounded up to £65
Below £1000 no stamp duty provided the certificate is completed on instrument of transfer.
Shares traded on ‘recognised growth market’ are exempt. Main example being Alternative
Investment Market (AIM).
Provided certain conditions are met it will not be charged on transfer of assets between companies
in a qualifying group – s42 Finance Act
4. Buyer needs to send the share certificate and Stamp duty under the section not chargeable if it applies. It applies
stock transfer form to the company. to any instrument which that effect is to convey or transfer ben
interest in property from one body corporate to another and the
5. Company should issue a new share certificate
bodies are associated at the time instrument executed.
in his name within 2 months - s776 and this is
the evidence of title for FSC. - Associated where one is parent of another, or both have
6. Company needs to add his name on register of same parent = it is ben owner of not less than 75% of
members within 2 months – s771 ordinary share capital. (2A) and (2B)
7. The change of composition is notified to the
Registrar of Companies on confirmation statement CS01.
Restrictions on transfer:
, - Art 26 MA = directors have absolute discretion and may refuse to place a name of the register of members.
But they must have been given this in the articles and if they do so wrongly then it can be
challenged by application to the court for order of rectification of the register – s125
There is a longstop time limit of 10 years for claims – s128.
Where they have some discretion then they must decide in reasonable amount of time = no more
than 2 months. Then they are obliged to deliver new share certificate.
If they exercise discretion and refuse, the court generally will not interfere unless proven it was not
in good faith.
If they refuse to register, there is no claim for damages for the buyer or rescission of contract.
Seller remains legal owner and his name remains on the register and he holds ON TRUST for the
buyer.
- SH may be permitted under a special article to transfer their share without restriction only to other SH and
their family.
- SH may be allowed to consider transferring to people who are not already SH only if they first offer those
shares to other SH at a fair value and they reject it.
WS15 Task: page 15 of the workshop:
How transfer of shares can be effected by the articles of association
6.2.4 = TT is not current share holder it is a TP
An offer has been received from Turbine Technology Limited
(‘TT’) to buy the shares. Advise on which provisions of 6.11 = Transfer Notice
Article 6 apply to this transfer and how this sale process
should be commenced. When Y receive it then they become Turbines agent
28 days to decide whether to take the shares.
Helpful to existing members – increase their shareholding and
give them more power
Technically can 6.11
TT is willing to pay £65 per share. Can a transfer notice be Not sure it’s a good thing practically
served on Yenlite, stating that E.Turbines is prepared to sell
the shares at £85 each (thereby discouraging existing
members from buying the shares)?
If the existing shareholders are not interested in buying the 6.16
shares at £85 per share, would E.Turbines then be free to sell 7.1 and 7.1.2
the shares to TT at £65 per share? What would be the
consequences if TT bought them for £65 per share? Repercussions to doing this.
6.12 – offer all 100,000 shares to all members at £65 each
Assume a properly drafted transfer notice is served on
Yenlite stating that E.Turbines would like to sell the shares at 6.14 – how to allocate the shares if total number of shares
£65 each. It is likely that Champion and Wind West would which accepting members (Champion and Wind West) wish to
each indicate an interest in buying all 100,000 shares. Pat purchase exceeds the number of shares available
Aston would not want to buy any. Under Article 6, how many - they each would be interested in 100,000
shares would Champion and Wind West be able to buy?
6.14.1 – proportion that its shareholding bears to the total of all
If each wants 100,000 then it is excess situation as cannot both h accepting members = 80,000
30,,000 x 100,000 = 37500
50,,000 x 100,000 = 62500
Adds up to 100,000 shares
- If there were excess then they will receive that
proportion of any remaining
What steps must be taken, and by whom, before E.Turbines 6.15
