Companies Act 2006: the final push (II)
The remaining sections of the Companies Act 2006 are due to come into effect on 1 October 2009. One important change involves the way that share capital and shares are managed.
Authorised share capital
Authorised share capital sets an upper limit on the number of shares that the directors of a company can issue. But since actual share issues often build in extra room for manoeuvre, the limit can be irrelevant. So, on 1 October, companies will no longer be required to have an authorised share capital. Directors will be able to create shares by board resolution. If a company wishes to have a limit on the number of shares that can be issued, then it should amend its articles accordingly. Companies House needs to be notified of any changes in capital through a new statement of capital.
What about existing companies? Changes to the memorandum mean that the authorised share capital provision switches to the articles of association. The rules allow a company to alter or drop the authorised share capital provision by ordinary resolution.
Allotment of shares
If a private company has only one class of shares, then directors will be able to allot shares without the prior authority of the shareholders. However, the rules also say that the power of directors to allot shares will be subject to the company’s articles; so shareholders can employ the articles to prevent or limit that power. In the cases of private companies with more than one class of shares and public companies, the directors will still need the backing of shareholders to allot shares.
What about existing companies? Directors of private companies with only one class of shares won’t be able to allot shares except where shareholders give their consent by ordinary resolution.
Purchase of a company’s own shares
Under the 2006 Act, public and private companies will have the authority to purchase their own shares unless they are stopped specifically from doing so by their articles.
If you would like any help or advice on the new rules, please don’t hesitate to contact us.