Business law lecture 6
Share Capital
■ Legal nature of Shares: ownership confers a complex bundle of rights (s 33 + s 456
CA 06)) including: the right to vote, a rt to declared dividends and the return of
surplus capital.
■ Classes of shares: different rts attach- depending on issue of shares see in a bit
■ Registration of a share in name of shareholder makes sh a member
Share ownership
■ Share ownership does NOT confer an interest in co assets: there is no
“unobjectionable definition of shares”
■ Share capital of a limited company-belongs to the company- this is for benefit of
creditors
■ Shares are “personal property” s 541 CA 2006
■ Shares are issued by the Directors: who may issue or allot if authorised by articles or
by ordinary resolution s 551 CA 06
■ and no need for private co to have an authorised share capital-articles can restrict
authority of directors to issue new shares (we saw this in earlier weeks on directors
duties)
Par or nominal value
■ Shares must have a fixed nominal value- s 542
■ Par or nominal value: share capital of a co: £100 made up of 100 x £1 shares-£1 is
nominal value Share premium: shares may be issued at a premium- say £1.25- £.25=
premium
Acquiring shares
■ By allotment or share issue: company allots shares to shareholders (issues)
■ By transfer: from existing member
■ Public co shares are freely transferable
■ Private co- subject to articles: pre-emption rts
■ Directors may refuse to register-discretion- need reasons s771
■ Remember directors duties !!
Balance Sheet
■ Share premium account s 610: That part of shareholders’ funds (shown separately on
the balance sheet formed of the premium paid for new shares above their nominal
value. It forms part of a company’s non-distributable reserves
■ Capital redemption reserve: A reserve fund into which profits are allocated for the
purpose of redeeming or buying back shares in the company. S 733
Statement of capital ss 9 and 10 CA06
■ S 9: a statement of capital and initial shareholdings must be submitted to the
registrar on application for registration of a co.
, Corporate Capital -shares
■ Shares
■ (i). Ordinary
■ (ii). Preference
■ (iii). Class rights
■ CA 2006, ss. 629-640
■ Cumbrian Newspapers Group Ltd v Cumberland &Westmoreland Herald Newspapers
& Printing Co Ltd [1987] Ch 1
Shares summary
■ Shares confer on a shareowner a number of rights in a company
■ Often divided into classes: ordinary and preference most common
■ Articles (and a shareholders agreement) will spell out the rights attaching to the
shares of each type if both
■ Shares may or may not have voting rights
■ Changing rights attaching to shares will be a variation in some cases
■ If there is a true variation need to follow procedure CA s 630
■ Review rules on issue and transfer
Corporate Disputes
■ This Part deals with how and in what circumstances shareholders can seek remedies
for wrongs done either to the company or themselves or both and also, the
remedies which can be obtained.
■ Issues:
■ What type of claim?
■ Who brings and against whom?
■ What are remedies?
Wrongs done to the company
■ The twin problems of the proper plaintiff principle and majority rule:
■ Foss v Harbottle (1843) 2 Hare 461
■ Two shareholders brought proceedings against five directors alleging
misappropriation of property by them. Court held injury was to the company ,the
company was the proper claimant and the shareholders were not competent to
bring the action. Exceptions …
Corporate Disputes /claims made by entities other than the company ie shareholders
■ Personal claims s33 CA 2006
■ Statutory Derivative Claim s260-264 CA 2006
■ Unfair Prejudice s994 CA 2006
■ Winding up s 122 IA 86
Personal claims s 33
■ The statutory contract
■ Rights qua shareholder : dividend, voting , notice of meetings
■ Not a license to enforce the articles
■ Go back to look at lecture 3
Share Capital
■ Legal nature of Shares: ownership confers a complex bundle of rights (s 33 + s 456
CA 06)) including: the right to vote, a rt to declared dividends and the return of
surplus capital.
■ Classes of shares: different rts attach- depending on issue of shares see in a bit
■ Registration of a share in name of shareholder makes sh a member
Share ownership
■ Share ownership does NOT confer an interest in co assets: there is no
“unobjectionable definition of shares”
■ Share capital of a limited company-belongs to the company- this is for benefit of
creditors
■ Shares are “personal property” s 541 CA 2006
■ Shares are issued by the Directors: who may issue or allot if authorised by articles or
by ordinary resolution s 551 CA 06
■ and no need for private co to have an authorised share capital-articles can restrict
authority of directors to issue new shares (we saw this in earlier weeks on directors
duties)
Par or nominal value
■ Shares must have a fixed nominal value- s 542
■ Par or nominal value: share capital of a co: £100 made up of 100 x £1 shares-£1 is
nominal value Share premium: shares may be issued at a premium- say £1.25- £.25=
premium
Acquiring shares
■ By allotment or share issue: company allots shares to shareholders (issues)
■ By transfer: from existing member
■ Public co shares are freely transferable
■ Private co- subject to articles: pre-emption rts
■ Directors may refuse to register-discretion- need reasons s771
■ Remember directors duties !!
Balance Sheet
■ Share premium account s 610: That part of shareholders’ funds (shown separately on
the balance sheet formed of the premium paid for new shares above their nominal
value. It forms part of a company’s non-distributable reserves
■ Capital redemption reserve: A reserve fund into which profits are allocated for the
purpose of redeeming or buying back shares in the company. S 733
Statement of capital ss 9 and 10 CA06
■ S 9: a statement of capital and initial shareholdings must be submitted to the
registrar on application for registration of a co.
, Corporate Capital -shares
■ Shares
■ (i). Ordinary
■ (ii). Preference
■ (iii). Class rights
■ CA 2006, ss. 629-640
■ Cumbrian Newspapers Group Ltd v Cumberland &Westmoreland Herald Newspapers
& Printing Co Ltd [1987] Ch 1
Shares summary
■ Shares confer on a shareowner a number of rights in a company
■ Often divided into classes: ordinary and preference most common
■ Articles (and a shareholders agreement) will spell out the rights attaching to the
shares of each type if both
■ Shares may or may not have voting rights
■ Changing rights attaching to shares will be a variation in some cases
■ If there is a true variation need to follow procedure CA s 630
■ Review rules on issue and transfer
Corporate Disputes
■ This Part deals with how and in what circumstances shareholders can seek remedies
for wrongs done either to the company or themselves or both and also, the
remedies which can be obtained.
■ Issues:
■ What type of claim?
■ Who brings and against whom?
■ What are remedies?
Wrongs done to the company
■ The twin problems of the proper plaintiff principle and majority rule:
■ Foss v Harbottle (1843) 2 Hare 461
■ Two shareholders brought proceedings against five directors alleging
misappropriation of property by them. Court held injury was to the company ,the
company was the proper claimant and the shareholders were not competent to
bring the action. Exceptions …
Corporate Disputes /claims made by entities other than the company ie shareholders
■ Personal claims s33 CA 2006
■ Statutory Derivative Claim s260-264 CA 2006
■ Unfair Prejudice s994 CA 2006
■ Winding up s 122 IA 86
Personal claims s 33
■ The statutory contract
■ Rights qua shareholder : dividend, voting , notice of meetings
■ Not a license to enforce the articles
■ Go back to look at lecture 3
