Share capital — allotment, transfer, maintenance of capital

BLP.07 — Share Capital: Allotment, Transfer, Maintenance of Capital

Allotment (issuing new shares) — Companies Act 2006

Work through the gates in order:

1. Cap on allotment? A company formed under CA 2006 has no authorised share capital limit by default (abolished). Check the articles for any cap.
2. Authority to allot (s.551). Directors of a company with more than one class of shares need authority — by ordinary resolution or in the articles. A private company with only one class can allot without authority unless the articles restrict it (s.550) — a key SQE distinction.
3. Pre-emption (s.561). New shares for cash must first be offered to existing shareholders pro rata. Disapply by special resolution (s.570/571). Private companies with one class may exclude/disapply pre-emption in the articles (s.567/569). Does not apply to non-cash consideration or to shares under an employees' share scheme.
4. Administration. Allot, then file form SH01, update the register of members and notify Companies House of any resulting PSC change within 14 days; shares are issued when the name is entered in the register of members.

Shares must not be allotted at a discount to nominal value (s.580). Any premium goes to the share premium account (s.610).

Transfer (existing shares)

• Need a stock transfer form + share certificate; stamp duty at 0.5% if consideration over £1,000 (rounded up to nearest £5).
• Transfer is effective once the buyer is entered in the register of members (legal title passes then, not on signing).
• Directors may have power to refuse to register (check articles, e.g. Model Article 26).

Maintenance of capital — creditor protection

General rule: a company must not return capital to members. Key routes/exceptions:

• Dividends only out of distributable profits (Part 23).
• Buyback of own shares (s.690): out of distributable profits or fresh issue proceeds; private companies may buy back out of capital (ss.709–723) with directors' solvency statement + special resolution + auditor's report + Gazette/creditor notice.
• Reduction of capital (s.641): private company = special resolution + solvency statement (no court needed); public company needs court confirmation.
• Financial assistance: prohibited for public companies (s.678) acquiring their own/holding-company shares; the prohibition was abolished for private companies.

Common traps

• Confusing s.550 (one class, no authority needed) with s.551 (authority needed).
• Forgetting pre-emption only bites on cash allotments.
• Resolution levels: allotment authority = ordinary; disapplying pre-emption / reduction / capital buyback = special.
• Stamp duty £1,000 threshold and 0.5% rate are on transfers, not allotments (no stamp duty on fresh issues).

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