Companies Act 2006 (c. 46)

(The document as of February, 2008)

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(1) This section has effect as to the manner in which offers required by section 561 are to be made to holders of a company's shares.

(2) The offer may be made in hard copy or electronic form.

(3) If the holder--

(a) has no registered address in an EEA State and has not given to the company an address in an EEA State for the service of notices on him, or

(b) is the holder of a share warrant,

the offer may be made by causing it, or a notice specifying where a copy of it can be obtained or inspected, to be published in the Gazette.

(4) The offer must state a period during which it may be accepted and the offer shall not be withdrawn before the end of that period.

(5) The period must be a period of at least 21 days beginning--

(a) in the case of an offer made in hard copy form, with the date on which the offer is sent or supplied;

(b) in the case of an offer made in electronic form, with the date on which the offer is sent;

(6) The Secretary of State may by regulations made by statutory instrument--

(a) reduce the period specified in subsection (5) (but not to less than 14 days), or

(b) increase that period.

(7) A statutory instrument containing regulations made under subsection (6) is subject to affirmative resolution procedure.

563 Liability of company and officers in case of contravention

(1) This section applies where there is a contravention of--

section 561 (existing shareholders' right of pre-emption), or
section 562 (communication of pre-emption offers to shareholders).

(2) The company and every officer of it who knowingly authorised or permitted the contravention are jointly and severally liable to compensate any person to whom an offer should have been made in accordance with those provisions for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.

(3) No proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of two years--

(a) from the delivery to the registrar of companies of the return of allotment, or

(b) where equity securities other than shares are granted, from the date of the grant.

Exceptions to right of pre-emption

564 Exception to pre-emption right: bonus shares

Section 561(1) (existing shareholders' right of pre-emption) does not apply in relation to the allotment of bonus shares.

565 Exception to pre-emption right: issue for non-cash consideration

Section 561(1) (existing shareholders' right of pre-emption) does not apply to a particular allotment of equity securities if these are, or are to be, wholly or partly paid up otherwise than in cash.

566 Exception to pre-emption right: securities held under employees' share scheme

Section 561 (existing shareholders' right of pre-emption) does not apply to the allotment of securities that would, apart from any renunciation or assignment of the right to their allotment, be held under an employees' share scheme.

Exclusion of right of pre-emption

567 Exclusion of requirements by private companies

(1) All or any of the requirements of--

(a) section 561 (existing shareholders' right of pre-emption), or

(b) section 562 (communication of pre-emption offers to shareholders)

may be excluded by provision contained in the articles of a private company.

(2) They may be excluded--

(a) generally in relation to the allotment by the company of equity securities, or

(b) in relation to allotments of a particular description.

(3) Any requirement or authorisation contained in the articles of a private company that is inconsistent with either of those sections is treated for the purposes of this section as a provision excluding that section.

(4) A provision to which section 568 applies (exclusion of pre-emption right: corresponding right conferred by articles) is not to be treated as inconsistent with section 561.

568 Exclusion of pre-emption right: articles conferring corresponding right

(1) The provisions of this section apply where, in a case in which section 561 (existing shareholders' right of pre-emption) would otherwise apply--

(a) a company's articles contain provision ("pre-emption provision") prohibiting the company from allotting ordinary shares of a particular class unless it has complied with the condition that it makes such an offer as is described in section 561(1) to each person who holds ordinary shares of that class, and

(b) in accordance with that provision--

(i) the company makes an offer to allot shares to such a holder, and

(ii) he or anyone in whose favour he has renounced his right to their allotment accepts the offer.

(2) In that case, section 561 does not apply to the allotment of those shares and the company may allot them accordingly.

(3) The provisions of section 562 (communication of pre-emption offers to shareholders) apply in relation to offers made in pursuance of the pre-emption provision of the company's articles.

This is subject to section 567 (exclusion of requirements by private companies).

(4) If there is a contravention of the pre-emption provision of the company's articles, the company, and every officer of it who knowingly authorised or permitted the contravention, are jointly and severally liable to compensate any person to whom an offer should have been made under the provision for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.

(5) No proceedings to recover any such loss, damage, costs or expenses may be commenced after the expiration of two years--

(a) from the delivery to the registrar of companies of the return of allotment, or

(b) where equity securities other than shares are granted, from the date of the grant.

Disapplication of pre-emption rights

569 Disapplication of pre-emption rights: private company with only one class of shares

(1) The directors of a private company that has only one class of shares may be given power by the articles, or by a special resolution of the company, to allot equity securities of that class as if section 561 (existing shareholders' right of pre-emption)--

(a) did not apply to the allotment, or

(b) applied to the allotment with such modifications as the directors may determine.

(2) Where the directors make an allotment under this section, the provisions of this Chapter have effect accordingly.

570 Disapplication of pre-emption rights: directors acting under general authorisation

(1) Where the directors of a company are generally authorised for the purposes of section 551 (power of directors to allot shares etc: authorisation by company), they may be given power by the articles, or by a special resolution of the company, to allot equity securities pursuant to that authorisation as if section 561 (existing shareholders' right of pre-emption)--

(a) did not apply to the allotment, or

(b) applied to the allotment with such modifications as the directors may determine.

(2) Where the directors make an allotment under this section, the provisions of this Chapter have effect accordingly.

(3) The power conferred by this section ceases to have effect when the authorisation to which it relates--

(a) is revoked, or

(b) would (if not renewed) expire.

But if the authorisation is renewed the power may also be renewed, for a period not longer than that for which the authorisation is renewed, by a special resolution of the company.

(4) Notwithstanding that the power conferred by this section has expired, the directors may allot equity securities in pursuance of an offer or agreement previously made by the company if the power enabled the company to make an offer or agreement that would or might require equity securities to be allotted after it expired.

571 Disapplication of pre-emption rights by special resolution

(1) Where the directors of a company are authorised for the purposes of section 551 (power of directors to allot shares etc: authorisation by company), whether generally or otherwise, the company may by special resolution resolve that section 561 (existing shareholders' right of pre-emption)--

(a) does not apply to a specified allotment of equity securities to be made pursuant to that authorisation, or

(b) applies to such an allotment with such modifications as may be specified in the resolution.

(2) Where such a resolution is passed the provisions of this Chapter have effect accordingly.

(3) A special resolution under this section ceases to have effect when the authorisation to which it relates--

(a) is revoked, or

(b) would (if not renewed) expire.

But if the authorisation is renewed the resolution may also be renewed, for a period not longer than that for which the authorisation is renewed, by a special resolution of the company.

(4) Notwithstanding that any such resolution has expired, the directors may allot equity securities in pursuance of an offer or agreement previously made by the company if the resolution enabled the company to make an offer or agreement that would or might require equity securities to be allotted after it expired.

(5) A special resolution under this section, or a special resolution to renew such a resolution, must not be proposed unless--

(a) it is recommended by the directors, and

(b) the directors have complied with the following provisions.

(6) Before such a resolution is proposed, the directors must make a written statement setting out--

(a) their reasons for making the recommendation,

(b) the amount to be paid to the company in respect of the equity securities to be allotted, and

(7) The directors' statement must--

(a) if the resolution is proposed as a written resolution, be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;

(b) if the resolution is proposed at a general meeting, be circulated to the members entitled to notice of the meeting with that notice.

572 Liability for false statement in directors' statement

(1) This section applies in relation to a directors' statement under section 571 (special resolution disapplying pre-emption rights) that is sent, submitted or circulated under subsection (7) of that section.

(2) A person who knowingly or recklessly authorises or permits the inclusion of any matter that is misleading, false or deceptive in a material particular in such a statement commits an offence.

(3) A person guilty of an offence under this section is liable--

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);

(b) on summary conviction--

(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);

(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).

573 Disapplication of pre-emption rights: sale of treasury shares

(1) This section applies in relation to a sale of shares that is an allotment of equity securities by virtue of section 560(2)(b) (sale of shares held by company as treasury shares).

(2) The directors of a company may be given power by the articles, or by a special resolution of the company, to allot equity securities as if section 561 (existing shareholders' right of pre-emption)--

(a) did not apply to the allotment, or

(b) applied to the allotment with such modifications as the directors may determine.

(3) The provisions of section 570(2) and (4) apply in that case as they apply to a case within subsection (1) of that section.

(4) The company may by special resolution resolve that section 561--

(a) shall not apply to a specified allotment of securities, or

(b) shall apply to the allotment with such modifications as may be specified in the resolution.

(5) The provisions of section 571(2) and (4) to (7) apply in that case as they apply to a case within subsection (1) of that section.

Supplementary

574 References to holder of shares in relation to offer

(1) In this Chapter, in relation to an offer to allot securities required by--

(a) section 561 (existing shareholders' right of pre-emption), or

(b) any provision to which section 568 applies (articles conferring corresponding right),

a reference (however expressed) to the holder of shares of any description is to whoever was the holder of shares of that description at the close of business on a date to be specified in the offer.

(2) The specified date must fall within the period of 28 days immediately before the date of the offer.

575 Saving for other restrictions on offer or allotment

(1) The provisions of this Chapter are without prejudice to any other enactment by virtue of which a company is prohibited (whether generally or in specified circumstances) from offering or allotting equity securities to any person.

(2) Where a company cannot by virtue of such an enactment offer or allot equity securities to a holder of ordinary shares of the company, those shares are disregarded for the purposes of section 561 (existing shareholders' right of pre-emption), so that--

(a) the person is not treated as a person who holds ordinary shares, and

(b) the shares are not treated as forming part of the ordinary share capital of the company.

576 Saving for certain older pre-emption requirements

(1) In the case of a public company the provisions of this Chapter do not apply to an allotment of equity securities that are subject to a pre-emption requirement in relation to which section 96(1) of the Companies Act 1985 (c. 6) or Article 106(1) of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) applied immediately before the commencement of this Chapter.

(2) In the case of a private company a pre-emption requirement to which section 96(3) of the Companies Act 1985 or Article 106(3) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this Chapter shall have effect, so long as the company remains a private company, as if it were contained in the company's articles.

(3) A pre-emption requirement to which section 96(4) of the Companies Act 1985 or Article 106(4) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this section shall be treated for the purposes of this Chapter as if it were contained in the company's articles.

577 Provisions about pre-emption not applicable to shares taken on formation

The provisions of this Chapter have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company.

Chapter 4 Public companies: allotment where issue not fully subscribed

578 Public companies: allotment where issue not fully subscribed

(1) No allotment shall be made of shares of a public company offered for subscription unless--

(a) the issue is subscribed for in full, or

(b) the offer is made on terms that the shares subscribed for may be allotted--

(i) in any event, or

(ii) if specified conditions are met (and those conditions are met).

(2) If shares are prohibited from being allotted by subsection (1) and 40 days have elapsed after the first making of the offer, all money received from applicants for shares must be repaid to them forthwith, without interest.

(3) If any of the money is not repaid within 48 days after the first making of the offer, the directors of the company are jointly and severally liable to repay it, with interest at the rate for the time being specified under section 17 of the Judgments Act 1838 (c. 110) from the expiration of the 48th day.

A director is not so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

(4) This section applies in the case of shares offered as wholly or partly payable otherwise than in cash as it applies in the case of shares offered for subscription.

(5) In that case--

(a) the references in subsection (1) to subscription shall be construed accordingly;

(b) references in subsections (2) and (3) to the repayment of money received from applicants for shares include--

(i) the return of any other consideration so received (including, if the case so requires, the release of the applicant from any undertaking), or

(ii) if it is not reasonably practicable to return the consideration, the payment of money equal to its value at the time it was so received;

(6) Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this section is void.

579 Public companies: effect of irregular allotment where issue not fully subscribed

(1) An allotment made by a public company to an applicant in contravention of section 578 (public companies: allotment where issue not fully subscribed) is voidable at the instance of the applicant within one month after the date of the allotment, and not later.

(2) It is so voidable even if the company is in the course of being wound up.

(3) A director of a public company who knowingly contravenes, or permits or authorises the contravention of, any provision of section 578 with respect to allotment is liable to compensate the company and the allottee respectively for any loss, damages, costs or expenses that the company or allottee may have sustained or incurred by the contravention.

(4) Proceedings to recover any such loss, damages, costs or expenses may not be brought more than two years after the date of the allotment.

Chapter 5 Payment for shares

General rules

580 Shares not to be allotted at a discount

(1) A company's shares must not be allotted at a discount.

(2) If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.

581 Provision for different amounts to be paid on shares

A company, if so authorised by its articles, may--

(a) make arrangements on the issue of shares for a difference between the shareholders in the amounts and times of payment of calls on their shares;

(b) accept from any member the whole or part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up;

(c) pay a dividend in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

582 General rule as to means of payment

(1) Shares allotted by a company, and any premium on them, may be paid up in money or money's worth (including goodwill and know-how).

(2) This section does not prevent a company--

(a) from allotting bonus shares to its members, or

(b) from paying up, with sums available for the purpose, any amounts for the time being unpaid on any of its shares (whether on account of the nominal value of the shares or by way of premium).

(3) This section has effect subject to the following provisions of this Chapter (additional rules for public companies).

583 Meaning of payment in cash

(1) The following provisions have effect for the purposes of the Companies Acts.

(2) A share in a company is deemed paid up (as to its nominal value or any premium on it) in cash, or allotted for cash, if the consideration received for the allotment or payment up is a cash consideration.

(3) A "cash consideration" means--

(a) cash received by the company,

(b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid,

(d) an undertaking to pay cash to the company at a future date, or

(e) payment by any other means giving rise to a present or future entitlement (of the company or a person acting on the company's behalf) to a payment, or credit equivalent to payment, in cash.

(4) The Secretary of State may by order provide that particular means of payment specified in the order are to be regarded as falling within subsection (3)(e).

(5) In relation to the allotment or payment up of shares in a company--

(a) the payment of cash to a person other than the company, or

(b) an undertaking to pay cash to a person other than the company,

counts as consideration other than cash.

This does not apply for the purposes of Chapter 3 (allotment of equity securities: existing shareholders' right of pre-emption).

(6) For the purpose of determining whether a share is or is to be allotted for cash, or paid up in cash, "cash" includes foreign currency.

(7) An order under this section is subject to negative resolution procedure.

Additional rules for public companies

584 Public companies: shares taken by subscribers of memorandum

Shares taken by a subscriber to the memorandum of a public company in pursuance of an undertaking of his in the memorandum, and any premium on the shares, must be paid up in cash.

585 Public companies: must not accept undertaking to do work or perform services

(1) A public company must not accept at any time, in payment up of its shares or any premium on them, an undertaking given by any person that he or another should do work or perform services for the company or any other person.

(2) If a public company accepts such an undertaking in payment up of its shares or any premium on them, the holder of the shares when they or the premium are treated as paid up (in whole or in part) by the undertaking is liable--

(a) to pay the company in respect of those shares an amount equal to their nominal value, together with the whole of any premium or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking; and

(b) to pay interest at the appropriate rate on the amount payable under paragraph (a).

(3) The reference in subsection (2) to the holder of shares includes a person who has an unconditional right--

(a) to be included in the company's register of members in respect of those shares, or

(b) to have an instrument of transfer of them executed in his favour.

586 Public companies: shares must be at least one-quarter paid up

(1) A public company must not allot a share except as paid up at least as to one-quarter of its nominal value and the whole of any premium on it.

(2) This does not apply to shares allotted in pursuance of an employees' share scheme.

(3) If a company allots a share in contravention of this section--

(a) the share is to be treated as if one-quarter of its nominal value, together with the whole of any premium on it, had been received, and

(b) the allottee is liable to pay the company the minimum amount which should have been received in respect of the share under subsection (1) (less the value of any consideration actually applied in payment up, to any extent, of the share and any premium on it), with interest at the appropriate rate.

(4) Subsection (3) does not apply to the allotment of bonus shares, unless the allottee knew or ought to have known the shares were allotted in contravention of this section.

587 Public companies: payment by long-term undertaking

(1) A public company must not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be, or may be, performed more than five years after the date of the allotment.

(2) If a company allots shares in contravention of subsection (1), the allottee is liable to pay the company an amount equal to the aggregate of their nominal value and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

(3) Where a contract for the allotment of shares does not contravene subsection (1), any variation of the contract that has the effect that the contract would have contravened the subsection, if the terms of the contract as varied had been its original terms, is void.

This applies also to the variation by a public company of the terms of a contract entered into before the company was re-registered as a public company.

(4) Where--

(a) a public company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking that is to be performed within five years of the allotment, and

(b) the undertaking is not performed within the period allowed by the contract for the allotment of the shares,

the allottee is liable to pay the company, at the end of the period so allowed, an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.

(5) References in this section to a contract for the allotment of shares include an ancillary contract relating to payment in respect of them.

Supplementary provisions

588 Liability of subsequent holders of shares

(1) If a person becomes a holder of shares in respect of which--

(a) there has been a contravention of any provision of this Chapter, and

(b) by virtue of that contravention another is liable to pay any amount under the provision contravened,

that person is also liable to pay that amount (jointly and severally with any other person so liable), subject as follows.

(2) A person otherwise liable under subsection (1) is exempted from that liability if either--

(a) he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned, or

(b) he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1).

(3) References in this section to a holder, in relation to shares in a company, include any person who has an unconditional right--

(a) to be included in the company's register of members in respect of those shares, or

(b) to have an instrument of transfer of the shares executed in his favour.

(4) This section applies in relation to a failure to carry out a term of a contract as mentioned in section 587(4) (public companies: payment by long-term undertaking) as it applies in relation to a contravention of a provision of this Chapter.

589 Power of court to grant relief

(1) This section applies in relation to liability under--

section 585(2) (liability of allottee in case of breach by public company of prohibition on accepting undertaking to do work or perform services),
section 587(2) or (4) (liability of allottee in case of breach by public company of prohibition on payment by long-term undertaking), or
section 588 (liability of subsequent holders of shares),

as it applies in relation to a contravention of those sections.

(2) A person who--

(a) is subject to any such liability to a company in relation to payment in respect of shares in the company, or

(b) is subject to any such liability to a company by virtue of an undertaking given to it in, or in connection with, payment for shares in the company,

may apply to the court to be exempted in whole or in part from the liability.

(3) In the case of a liability within subsection (2)(a), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to--

(a) whether the applicant has paid, or is liable to pay, any amount in respect of--

(i) any other liability arising in relation to those shares under any provision of this Chapter or Chapter 6, or

(ii) any liability arising by virtue of any undertaking given in or in connection with payment for those shares;

(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount;

(i) has performed in whole or in part, or is likely so to perform any such undertaking, or

(ii) has done or is likely to do any other thing in payment or part payment for the shares.

(4) In the case of a liability within subsection (2)(b), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to--

(a) whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any provision of this Chapter or Chapter 6;

(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount.

(5) In determining whether it should exempt the applicant in whole or in part from any liability, the court must have regard to the following overriding principles--

(a) a company that has allotted shares should receive money or money's worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up;

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