Authorised Share Capital - Abolished
From 1 October 2009, a company will no longer need to have a maximum authorised share capital. A resolution granting authority to allot shares will no longer need to include a resolution to increase the authorised capital. Companies will no longer be thought of as having authorised but unissued shares.
A company incorporated before 1 October 2009 will, however, continue to be subject to any maximum authorised capital stated in its memorandum. This will be deemed to be written into its articles from 1 October 2009 where it will act as a limit on the amount of shares that can be allotted. Although the limit can be changed by a resolution of the shareholders, companies may prefer to remove it altogether by amending their articles. Also, given that authority to allot shares over a stated maximum can be granted under CA 2006, companies may choose to amend their articles to remove the authorised share capital provision to avoid it appearing that they are allotting shares in excess of their authorised capital.
Authority to Allot – Simpler for Some Private Limited Companies
Subject to any prohibition in the articles, after 1 October 2009, directors of private limited companies with only one class of share will no longer need shareholder authority to allot new shares of that class.
This relaxation will not automatically apply to qualifying companies incorporated before 1 October 2009; shareholders of such companies will need to pass an ordinary resolution to confer this power on their directors.
Directors of private companies with more than one class of share and directors of public companies will still require authority to allot shares, either by the articles or by ordinary resolution.
An authorisation to allot shares under the 1985 Act which is in force on 1 October 2009 will have effect as if given under CA 2006.
From 1 October 2009, companies will no longer be permitted to confer indefinite authority upon their directors to allot shares. All such grants of authority must state the maximum amount of shares that may be allotted under it and be restricted to a period of no more than five years.
It is currently unclear as to whether existing authorities to allot shares for a time period exceeding five years, or indefinitely, given under the old elective regime will continue to have effect for their entire duration.
Exclusion and Disapplication of Statutory Pre-Emption Rights by Private Companies
In CA 2006, provisions granting statutory rights of pre-emption to existing shareholders on new cash issues largely replicate those in the 1985 Act.
Private companies may generally exclude such pre-emption rights by provision contained in their articles. Where an existing private company’s articles contain provisions excluding shareholders’ pre-emption rights under the 1985 Act, these provisions will continue post - 1 October 2009 as if they were made under CA 2006.
From 1 October 2009, directors of private limited companies with only one class of shares will be given the power to allot shares of that class as if such pre-emption rights did not apply, if authorised to do so by their articles or by special resolution.
From 1 October 2009, directors of companies who are generally authorised by their shareholders to allot shares will be given the power to allot shares pursuant to that authority as if such pre-emption rights did not apply, if authorised to do so by their articles or by special resolution.