Department of Law and Criminology

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Education
with the personal touch

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COMPANY LAW

SHARE CAPITAL

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SHARES TYPES AND CLASSES

1. ORDINARY

2. PREFERENCE

3. MANAGEMENT / DEFERRED

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SHARE CAPITAL

Allotment of shares power to allot is a director power

(originally automatic, but now must be given resolution
or articles see Sec 551 CA 2006)

Note Sec 550 CA 2006 private company with one

share type directors MAY exercise the power.

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CONSIDERATION ON ALLOTMENT

Consideration in the form of cash only?

PUBLIC COMPANY.
Sec 585 CA 2006 work / services
Sec 591 CA 2006 right to enforce such
Secs 593-596 CA 2006 undertaking or
property non-cash consideration.
Report 6 months pre allotment file Report

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CONSIDERATION ON ALLOTMENT cont.

PRIVATE COMPANY Contract principles.

1. Past consideration
Eddystone Marine Ins. Co. (1893) 3 Ch 9
2. Adequacy / sufficiency Re: Wragg Ltd
(1897) Ch 796.
3. Consideration must not be illusory
Hong Kong & China Gas Co v Glen
(1914) Ch 527

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PRIVATE COMPANY cont.

Note the freedom with the private company

compared with public protection measures for
the plc.

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ALTERATION OF SHARE CAPITAL

Sec 617 CA 2006 Increase and Reduction

permitted.
Sec 618 CA 2006 Consolidation and Sub-
division.

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REDUCTION OF CAPITAL

Sec 641 CA 2006

Private Company
A of A permit
Special Resolution
Statutory Statement to Reg. of Companies

Public Company
A of A permit
Special Resolution
Court approval (creditor rights)

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POSSIBLE ELEMENTS WITH REDUCTION

Return of capital may be at a premium

Re: Saltdean Est. Co. Ltd. (1968) 1 WLR 1844.

Reduction can involve a transfer of shares in another

company to the members.

If capital is lost all members should lose equally - BUT

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PREFERENCE SHAREHOLDERS

Reduction can affect this type of shareholder in

isolation (significance of what happens on a
winding up)

Re: Mackenzie Ltd (1916) 2 Ch 45 and

Prudential Assu. Co. Ltd. V Chatterley-Whitfield
Colls. (1949) AC 512.

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CREDITOR RIGHTS

Creditor right to object if

cancellation of shareholder liability
payment to shareholders
court direction.

List of creditors and court discretion Sec 646

CA 2006 Need to safeguard creditors.

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VARYING CLASS RIGHTS

Comply with articles or under Sec 630 CA 2006

obtain 75% support of class.
A minimum 15% minority of the class under Sec
633 CA 2006 can object to variation within 21
days of resolution being passed.

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CLASS RIGHTS

Interference with rights or enjoyment of rights?

Greenhalgh v Arderne Cinemas Ltd.

[1946] 1 ALL ER 512
subdivision of shares

White v Bristol Aeroplane Co. [1953] Ch 65

allotment of shares to ordinary shareholders only.

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