Share Capital/Capital Maintenance

Share Capital/Capital Maintenance

1. Advantages of alloting shares

   • pre emption rights maintain existing holders equity
   • Cheaper to service than loans
   • more flexible
   • able to design

2. Allotment

   • private company with 1 class
     • directors have unlimited authority
       • s549
   • authority for up to 5 years needed
     • s551
   • consider pre-emption rights
     • unless authority not to
       • s569
   • must not be issued at a discount
     • s552
   • Plc's cannot issue in transfer for services
     • s585
   • non cash provisions
     • s593-609

3. Transfers

   • normally to whomever the transferor wishes
   • directors
     • register transfers
     • tell members if not
       • s777(1)
       • if unjustified new member can apply for rectification of register
         • s1225
   • Smith v Fawcett
     • exercise good faith in transfer
   • Stamp Duty
     • 0.5%
     • minimum £500

4. Share Certificates

   • prima facie evidence of right
   • cannot deny rights not a holder
   • CREST
     • nominees hold electronic form

5. Reduction of Capital

   • why?
     • too much capital
     • devaluation of assets
     • may be able to pay dividends again
   • court application
     • s641
     • editors entitled to object
       • s646
   • solvency statement
     • signed by directors
       • 642
       • Not signed
         • court procedure
           • s641
       • liable if no reasonable grounds
         • s643(4)
   • shares do not exist

6. Re-Purchase

   • Why?
     • to get rid of a member
     • restore control
     • increase asset value per share
     • to deter takeover bid
     • departing employee
     • no other market for shares
   • method
     • Off-Market
       • s694-700
       • Private companies
       • off-market plcs
     • Market
       • s701

7. Financial Assistance

   • difficult unless benefits employees
   • Brady v Brady
     • Lord Oliver
       • requirment: best interests of the company

8. Dividends

   • only where accumulated realised profits > accumlated realised assets
     • Revalution not realised as not sold
   • Plc?
     • Net Asset Rule
       • s831
       • net assets > share capitcal
   • Bairstow v Queens Moat Houses
     • liable for unjustified dividends
       • s847
       • member too if known

9. Insider Dealing

   • s52 Criminal Justice Act 1993
     • exploits information for profit
   • defences
     • not expected result
     • information disclosed
     • Information did not influence

10. Squeeze out provisions

    • min < 10% has to sell in takeover
      • s974