Company Finance- equity and debt
Shares
Maintenance of share capital is an overriding principle in company law (Aveling Barford v
Perion Ltd)- therefore, creditors can ensure some security as opposed to capital being
disposed of to shareholders.
a) A company must not generally purchase its own shares
s.658
b) A public company may not generally give financial
assistance to anyone for the purpose of buying company
shares
c) Dividends must NOT be paid out of capital, ONLY
distributable profits
d) If a public company suffers significant loss of capital, a
general meeting must be held to discuss the problem
e) A subsidiary may not be a member of its own holding
company and any allotment or transfer of shares in a
holding company to its subsidiary is void
EXCEPTIONS
Can reduce share capital= permission from the court or if private company by special
resolution under ss.641-648
Share buy-back s.690 or redeem 684-689 its own shares
Purchase its own shares under a court order under s.994 to buy out a minority on the
conversion of a public company to a private company
Return capital to shareholders upon winding up (at the bottom of priority chain)
, ISSUING SHARES- EQUITY FINANCE
board receiving an application from a person who wants to buy shares from the company,
resolving to allot those shares, issuing them with a share certificate and entering the person’s
name into the register of members to file with Companies House.
Commercial reasons-options to company
If they get a loan- likely considerations of security
Preference shares issued- does not give voting rights but allows preference upon winding up
Allotment of new shares will affect the shareholder’s voting rights and dividends as it dilutes.
Therefore, the director’s need authority to issue new shares under s.549 and the
statutory pre-emption rights given to existing shareholders mean they get the right to
first refusal under s.561 and 565.
Pre- CA 2006 Companies may have restriction in their articles that places limit on share capital=
may need amending by ordinary resolution
Private companies with 1 class of shares
Directors automatically have the power to allot shares, provided it is a private company with
one class of shares and there is nothing contrary in the articles s.550.
If pre-2009 company wishes to use the power under s.550 they will need to pass an ordinary
resolution with the shareholders.
Public or private with more than 1 class of shares
Public or private with more than one class of shares-
Directors can only issue new shares if they have the authority to do so- given either by special
articles or ordinary resolution of the shareholders at a GM or WR s.549-551.
s.551(3) authorisation must state the maximum amount of shares allotted under it and specify
the date it will expire
This resolution is different because it must be filed with the registrar of companies
s.551(9)
s.555- a return of allotments must be filed with Companies House within 1 month, as must a
modified statement of capital s.555(3). Both are contained in form SH01.
Shares
Maintenance of share capital is an overriding principle in company law (Aveling Barford v
Perion Ltd)- therefore, creditors can ensure some security as opposed to capital being
disposed of to shareholders.
a) A company must not generally purchase its own shares
s.658
b) A public company may not generally give financial
assistance to anyone for the purpose of buying company
shares
c) Dividends must NOT be paid out of capital, ONLY
distributable profits
d) If a public company suffers significant loss of capital, a
general meeting must be held to discuss the problem
e) A subsidiary may not be a member of its own holding
company and any allotment or transfer of shares in a
holding company to its subsidiary is void
EXCEPTIONS
Can reduce share capital= permission from the court or if private company by special
resolution under ss.641-648
Share buy-back s.690 or redeem 684-689 its own shares
Purchase its own shares under a court order under s.994 to buy out a minority on the
conversion of a public company to a private company
Return capital to shareholders upon winding up (at the bottom of priority chain)
, ISSUING SHARES- EQUITY FINANCE
board receiving an application from a person who wants to buy shares from the company,
resolving to allot those shares, issuing them with a share certificate and entering the person’s
name into the register of members to file with Companies House.
Commercial reasons-options to company
If they get a loan- likely considerations of security
Preference shares issued- does not give voting rights but allows preference upon winding up
Allotment of new shares will affect the shareholder’s voting rights and dividends as it dilutes.
Therefore, the director’s need authority to issue new shares under s.549 and the
statutory pre-emption rights given to existing shareholders mean they get the right to
first refusal under s.561 and 565.
Pre- CA 2006 Companies may have restriction in their articles that places limit on share capital=
may need amending by ordinary resolution
Private companies with 1 class of shares
Directors automatically have the power to allot shares, provided it is a private company with
one class of shares and there is nothing contrary in the articles s.550.
If pre-2009 company wishes to use the power under s.550 they will need to pass an ordinary
resolution with the shareholders.
Public or private with more than 1 class of shares
Public or private with more than one class of shares-
Directors can only issue new shares if they have the authority to do so- given either by special
articles or ordinary resolution of the shareholders at a GM or WR s.549-551.
s.551(3) authorisation must state the maximum amount of shares allotted under it and specify
the date it will expire
This resolution is different because it must be filed with the registrar of companies
s.551(9)
s.555- a return of allotments must be filed with Companies House within 1 month, as must a
modified statement of capital s.555(3). Both are contained in form SH01.
