Share Capital
About
Us|Company
Formations|Companies
For Sale|Services|Products|
Info|Contact
Us| Basket
0 item(s) £0.00
0 item(s) £0.00
Share Capital
| Share Capital - GBA6 Contents
 Back to top Introduction This booklet is an initial guide to quite a complex subject. It cannot replace professional advice. It:
Back to top CHAPTER 1 Share capital 1. What is share capital? When a company is formed, the person or people forming it decide whether its members' liability will be limited by shares. The memorandum of association (one of the documents by which the company is formed) will state:
2. What is authorised capital? The amount of share capital stated in the memorandum of association is the company's 'authorised' capital. 3. Is there a maximum and minimum share capital? There is no maximum to any company's authorised share capital and no minimum share capital for private limited companies. However, a public limited company must have an authorised share capital of at least £50,000 (and, if it is trading, issued capital of £50,000 - see question 5). 4. Can a company alter its authorised share capital? A company can increase its authorised share capital by passing an ordinary resolution (unless its articles of association require a special or extraordinary resolution ). A copy of the resolution - and notice of the increase on Form 123 - must reach Companies House within 15 days of being passed. No fee is payable to Companies House. A company can decrease its authorised share capital by passing an ordinary resolution to cancel shares which have not been taken or agreed to be taken by any person. Notice of the cancellation, on Form 122 , must reach Companies House within one month. No fee is payable to Companies House. For information about resolutions, see our booklet, 'Resolutions' . 5. What is issued capital? Issued capital is the value of the shares issued to shareholders. This means the nominal value of the shares rather than their actual worth. The amount of issued capital cannot exceed the amount of the authorised capital. A company need not issue all its capital at once, but a public limited company must have at least £50,000 of allotted share capital. Of this, 25% of the nominal value of each share and any premium must be paid up before it can can get a trading certificate allowing it to commence business and borrow.
A company may increase its issued capital by allotting more shares but only up to the maximum allowed by its authorised capital. Allotments must only be done under proper authority (see question 7 ).
A company cannot normally reduce its issued capital as this is the personal property of the shareholders, not of the company. However, the following exceptions apply:
7. What does the allotment of shares mean? 'Allotment' is the process by which people become members of a company. Subscribers to a company's memorandum agree to take shares on incorporation and the shares are regarded as 'allotted' on incorporation. Later, more people may be admitted as members of the company and are allotted shares. However, the directors must not allot shares without the authority of the existing shareholders. The authority will either be stated in the company's articles of association or given to the directors by resolution passed at a general meeting of the company. 8. What type of resolution is required to give authority to allot shares? Any public or private company with share capital may give authority by ordinary resolution . The authority must be for a fixed period of up to five years. Any ordinary resolution giving, varying, revoking or renewing an authority to allot shares must be delivered to Companies House within 15 days of being passed. A private company with share capital may pass an 'elective resolution' , to give authority for any fixed period, which may be longer than five years or for an indefinite period. An elective resolution must also be delivered to Companies House within 15 days of being passed. For more information about resolutions, see our booklet 'Resolutions' . 9. Must a public company notify Companies House when an offer of shares is made to the public? No. With effect from 1 July 2005, prospectuses and listing particulars are no longer required to be registered at Companies House. However, the general rule is that a person may not make an offer of securities to the public in the UK, or seek admission to trading on a regulated market in the UK, unless a prospectus approved by the Financial Services Authority has been published. For more information on these requirements, please contact the Financial Services Authority ( www.fsa.gov.uk or telephone 020 7066 1000).10. Must a company notify Companies House when an allotment of shares has been made? Yes. Within one month of the allotment of shares, a return on Form 88(2) must be delivered to Companies House. No fee is payable to Companies House. A return of allotments must reach Companies House within one month of the first date of allotment . If shares are allotted over a period of time, particularly in a rights issue (see question 15), it is not acceptable to delay delivery until all the shares have been allotted if this means the form will be late. Instead, you should complete consecutive forms and deliver them within one month of the first allotment stated on each form.
If the shares are to be allotted for a non-cash payment (see questions 12 and14), the amount entered on the form against ‘Amount (if any) paid or due on each' must be ‘nil' or ‘0.00'.
13. Must I send any more information if allotments include non-cash payments? Yes. Form 88(2) must show the extent to which the shares are to be treated as paid-up. This must be stated as a percentage of the total amount payable in respect of the nominal value and any premium.
Form 88(2) must also include a brief description of the non-cash payment for which the shares were allotted (for example, 'in return for the transfer of 100 ordinary shares of £1 in XYZ limited' or ‘capitalisation of reserves'). It must be accompanied by the written contract under which title of the shares is constituted. If there is no written contract, a Form 88(3) must be delivered to Companies House with Form 88(2) within one month of the allotment. No fee is payable to Companies House. Form 88(3) is not acceptable when there is a written contract.
Please note: For contracts entered into after 30 November 2003, there is no need to have the written contract or Form 88(3) stamped by the Inland Revenue. 14. What are bonus shares? If authorised by its articles, a company may resolve to use any undistributed profits, or any sum credited to the company's ‘share premium account' or ‘capital redemption reserve' to finance an issue of wholly or partly paid up 'bonus' shares to the members in proportion to their existing holdings. The shareholders to whom the shares are issued pay nothing. Since the issue may reduce the amount of money available for paying dividends, the term 'bonus' is not always appropriate. The correct term is 'capitalisation of reserves' or ‘capitalisation of profits' but the terms 'scrip -' or ' scrip - issue' are also used to describe such shares. A company can also use a capitalisation of profits to credit partly paid shares with further amounts to make them paid up. The allotment of bonus shares must be notified to Companies House on Form 88(2) . The amount paid or due on each share is ‘nil'or ‘0.00' and the shares are shown as paid up ‘otherwise than in cash'. In addition, if a listed public company issues bonus shares in respect of shares held in treasury, the company must notify Companies House on Form 169(1B) . Stamp duty is not payable. No fee is payable to Companies House. 15. What are pre-emption rights? These are the rights of existing members to be offered new shares by the company. 'Pre-emption' rights give members the opportunity to accept or reject a share offer before the company offers new shares elsewhere. Note: pre-emption rights do not apply to allotments of shares that are issued as wholly or partly paid-up for a non-cash payment or shares in an employees' share scheme. (An employees' share scheme means a scheme for encouraging share ownership by employees, former employees and their families.) The memorandum or articles of a private company may exclude pre-emption rights; however, a public company's cannot. The Companies Act 1985 allows a company to pass a special resolution not to apply pre-emption rights. This is known as the 'disapplication of pre-emption rights'. The resolution will apply to one specific allotment; a further resolution is needed if similar conditions were to apply to further allotments. A copy of the special resolution must be delivered to Companies House within 15 days of being passed. No fee is payable to Companies House. 16. What happens if a person refuses to pay for shares? A member is liable to pay up the nominal value of each of his shares and the amount owing to the company is a debt which can be 'called up'. If a member refuses to pay all or any call on a share, the company may use forfeiture proceedings if permitted by its articles. A typical procedure is set out in paragraphs 18-22 of Table A of The Companies (Tables A to F) Regulations 1985 (if alternative provisions have not been adopted). As these proceedings are of a penal nature the regulations must be followed exactly, otherwise the court may declare forfeiture proceedings void. A forfeited share may be sold, re-allotted or otherwise disposed of at the discretion of the directors. Companies House need not be notified of the forfeiture or re-allotment except in the list of members on the company's next annual return . If a member cannot pay a call on shares, and if the member and the company agree, the shares may be surrendered to the company. This has the same effect as forfeiture but avoids the formal procedure. The company may only accept surrender if it could have used its power of forfeiture. A private company may hold forfeited shares indefinitely pending re-allotment. A public company must cancel the forfeited shares if they are not otherwise disposed of after three years. If the cancellation were to reduce a public company's allotted capital below the statutory minimum , it would have to re-register as a private company. A company cannot use forfeited shares for the purposes of voting. 17. What is paid-up capital, uncalled capital, reserve capital and share premium? These terms are used to describe the make-up of a company's share capital:
Back to top CHAPTER 2 Shares 1. Are there different types of shares? A company may have as many different types of shares as it wishes, all with different conditions attached to them. Generally share types are divided into the following categories:
Yes, and different types of share may be in different currencies. However, a public limited company must have at least £50,000 of its issued capital in sterling, irrespective of what other currency it uses. 3. Can a company change the currency of its shares? No, not directly. However, a company may purchase its own shares (see questions 7 and 8 ) and allot shares in a different currency or it may seek a court order to reduce its issued capital to zero, cancel its authorised capital, and simultaneously create capital and allot shares on a proportional basis in the new currency. Remember that a public limited company must always have a sterling share capital of at least £50,000. 4. Can a company change its shares? If authorised by its articles of association , a company may pass an ordinary resolution to:
For more information about resolutions, see our booklet 'Resolutions' . 5. Can class rights be amended? Yes. A company may alter the rights attached to any class of shares. How this can be done depends on whether the rights stem from the memorandum or articles or elsewhere. However, a company cannot convert non-redeemable shares into redeemable shares. Dissenting shareholders who hold at least 15% of the issued shares of that class may apply to the court to have the variation cancelled. They must do this within 21 days after consent was given or a resolution passed to vary the rights. The company must deliver a copy of the court order to Companies House within 15 days of it being made.
6. Can redeemable shares be used to reduce issued capital? Yes. A company which has issued redeemable shares may reduce its issued share capital by redeeming them in accordance with the agreement under which they were issued. However, if the shares are not returned to the company in accordance with the agreement - for example, if they are returned earlier than stated in the agreement - then the transaction must be dealt with as a purchase of the company's own shares - see question 7. Notification of redemption of shares must be delivered to Companies House within one month on Form 122 . No fee is payable to Companies House. 7. Can a company purchase its own shares? Yes, if permitted by its articles, a company may pass a special resolution to authorise the company to buy some of its shares. But it cannot do so if this would leave only redeemable shares in issue. The terms of the resolution will depend on whether it is a 'market purchase' (that is, a purchase made on a recognised stock exchange) - or an 'off-market purchase' (that is, a purchase made otherwise than on a recognised stock exchange or made on a recognised stock exchange but not subject to a marketing arrangement on that exchange). An off-market purchase may only be made:
However, a listed public company may hold the shares ‘in treasury' for resale or transfer to an employees' shares scheme at a later date, in which case the purchase must be notified to Companies House on
The purchase by a company of its own shares is a chargeable transaction under the Finance Act 1986 .Stamp Duty is payable on the aggregate amount of the re-purchase price at ½% rounded up to the nearest multiple of £5.
No fees are payable to Companies House on Forms 169, Form 196(1B) or Form 173. 8. Do transfer documents need to be completed for redemption and purchase of own shares? > A transfer document is not necessary when a company redeems its shares, or buys its own shares and cancels them. None of these events qualifies as a transfer of shares, and the company's issued share capital must be reduced on the return of the shares to the company. (The company's authorised share capital is not affected). A transfer document is also not necessary when a listed public company buys its own shares and holds them in treasury for later disposal. Although this type of purchase does not reduce the company's issued share capital - the company becomes a shareholder and is entered as such in the register of members - a stamped Form 169(1B) must be completed and delivered to Companies House within 28 days of the purchase. No fee is payable to Companies House. If a listed public company is buying some shares to hold in treasury and some to be cancelled, then Form 169 must be completed for the shares that are to be cancelled and Form 169(1B) must be completed for the shares that are to be held in treasury. No fee is payable to Companies House. If the company subsequently decides to cancel treasury shares, or sell treasury shares, or transfer treasury shares to an employees' shares scheme, Companies House must be notified within 28 days on Form 169A(2). £5 stamp duty is payable on the cancellation of treasury shares but not on their sale or transfer to an employees' share scheme.
9. Can I buy shares from someone else?
11. What is a transmission of shares? In some instances shares may be transmitted by operation of law. The main examples of this are when a registered shareholder dies or becomes bankrupt. On death, shares held in the sole name of the deceased are vested in the personal representative or executor of the deceased. This person should inform the company and provide the necessary evidence so that the fact can be registered and the personal representative can receive all notices and dividends relating to the shares. The articles of association of companies often provide that a personal representative cannot exercise the votes attaching to the deceased's shares until he or she is registered as the holder of the shares. On the winding up of the deceased's estate, the personal representative must inform the company of the beneficiary (or beneficiaries) of the shares so that the necessary alterations to the register of members may be made and new certificates issued. If a share is jointly held, the survivor(s) will be the only person(s) recognised as having title to the share. The company should be informed immediately and be given any necessary evidence of the death in order to alter the register of members and issue a new share certificate. The position of a bankrupt shareholder is similar. Until a new member is registered, the rights to dividends are vested in the trustee in bankruptcy. The bankrupt may remain a member and be able to vote, but only in accordance with the directions of the trustee. This is so where the name of the bankrupt shareholder remains on the register, but the trustee generally has a right under the company's articles of association to apply to be registered as a member in respect of the bankrupt's shares. Any restrictions on the transfer of shares contained in the company's articles will normally apply to a transfer or application resulting from the death or bankruptcy of a shareholder. 12. What are share warrants? A share warrant is a document which states that the bearer of the warrant is entitled to the shares stated in it. If authorised by its articles, a company may convert any fully paid shares to 'share warrants'. These warrants are easily transferable without any need for a transfer document; that is, they can simply be passed from hand to hand. When share warrants are issued, the company must strike out the name of the shareholder from its register of members and state the date of issue of the warrant and the number of shares to which it relates. Subject to the articles, a share warrant can be surrendered for cancellation. If so, the holder is entitled to be re-entered into the register of members. Vouchers are usually issued with the share warrants in order that any dividends may be claimed. The holder of a share warrant remains a shareholder but whether they are a member of the company depends on the articles of the company. A company which converts all its shares to share warrants should be careful: it could become a memberless company and therefore cease to exist. 13. What happens if a share certificate is lost? This will be dealt with in the company's articles. For example, a typical provision is set out in paragraph 7 of Table A of The Companies (Tables A to F) Regulations 1985 which allows for a replacement share certificate to be issued when the directors are assured that the old certificate has been lost, worn out, defaced, or destroyed. The directors will normally require the holder to give up any defaced or worn-out certificate and to sign an indemnity about the use of any lost or destroyed certificate. They may also require the holder to pay any reasonable expenses for investigating any evidence of loss. 14. Can a share be cancelled if the holder cannot be traced? No. The share belongs to the registered holder, not the company. If a person is eventually declared legally dead, then the share should be transmitted to the beneficiary (or beneficiaries) - see question 11 . If authorised by its articles, a company may retain any dividends that remain unclaimed after a certain period. Back to top CHAPTER 3 Further information 1. Where can I get further information? You should consult your professional advisers on all share capital matters. You may also telephone Companies House on 0870 3333636 for basic guidance. 2. How do I send information to the Registrar? You may deliver documents to the Registrar by hand (personally or by courier), including outside office hours, on bank holidays and at weekends to Cardiff, London and Edinburgh. You may also send documents by post, by the Hays Document Exchange service (DX) or by Legal Post (LP) in Scotland. If you send documents, please address them to:
If you are sending documents by post, courier or Britdoc (DX) and would like a receipt, Companies House will provide an acknowledgement if you enclose a copy of your covering letter with a pre-paid addressed return envelope. We will barcode your copy letter with the date of receipt and return it to you in the envelope provided. Please note: an acknowledgement of receipt does not mean that a document has been accepted for registration at Companies House.
3. Where do I get forms and guidance booklets? This is one of a series of Companies House booklets which provide a simple guide to the Companies Act s and related legislation. Statutory forms and guidance booklets are available, free of charge from Companies House. The quickest way to get them is through this website or by telephoning 0870 3333636. If you prefer you can write to our stationery sections in Cardiff or Edinburgh . Forms can also be obtained from legal stationers, accountants, solicitors and company formation agents - addresses in business phone books. Back to top |
|||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
| |||||
| Links : Affiliates | Business Services | Investments | Shopping Portal | Links |  |
 |
|||
